Pillar Two Recent Updates

OECD Updates

Throughout 2023, the OECD Inclusive Framework has continued its work on the development of the Pillar Two Global anti-Base Erosion Rules in advance of the introduction of the rules on 31 December 2023. 

In mid-July, the OECD released promised additional administrative guidance on the operation of the rules, with the main areas of focus being;

• The design of a Qualified Domestic Minimum Top-up Tax (QDMTT);
• Currency conversion rules for GloBE calculations;
• Guidance on interaction of tax credits with the Pillar Two rules;
• Two additional safe harbours’;
  • Permanent QDMTT Safe Harbour,
  • Transitional UTPR Safe Harbour,
• Clarification around application of the Substance-Based Income Exclusion (SBIE) rule;
• Model articles and commentary for the treaty based Subject to tax rule, and
• Detailed guidance on the proforma GloBE Information Return.

This guidance follows on feedback received by the OECD from Governments, tax payers and interested parties, at ongoing public hearings in Paris, for further clarity on the application of these complex rules and addresses a number of the uncertainties identified with existing guidance.  Most welcome will be the additional safe-harbours which defer the full application of the documentary requirements of the Pillar Two regime for group operations in high tax countries. 

However, the OECD’s work is not yet finished, and work on the GloBE implementation framework, which includes ensuring coordination and consistency in the application of the rules internationally continues.

Department of Finance Second Feedback Statement

The OECD’s releases were quickly followed by the Irish Department of Finance publication of their Second Feedback Statement on Pillar Two. This summarises the most recent round of written feedback from interested parties, and ongoing interaction between the Department and the TALC BEPS subcommittee on the development of the rules in Ireland. The department are seeking further input on several outstanding matters, which will help them in drafting Irish legislation implementing the rules, which is due to be published in Finance Bill 2023 in October. 

As the implementation date for Pillar Two quickly approaches, groups are encouraged to engage with advisors to ensure they understand the impact of these rules and the multiple nuances in the interpretation of the rules.  Group ERP and tax reporting systems will need to be updated soon to ensure that groups are able to deal with the complex reporting and computational requirements of the Pillar Two rules. 

For additional information on the impact of the Pillar Two Rules, contact your usual Grant Thornton contact.  See also our series of video blogs from our Grant Thornton International colleague, Monique Pisters: