Global Minimum Tax

What the rules do

The OECD-led international agreement known as Pillar Two, enacted into national law. To stop multinational groups parking profit in low-tax jurisdictions, an effective tax rate is computed for each jurisdiction the group operates in. Where it falls short of 15%, a top-up tax is charged on the difference. Korea has implemented this in the Adjustment of International Taxes Act.

Does it apply to your group?

The rules catch multinational groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years, measured on the ultimate parent's consolidated financial statements. Purely domestic groups are outside the scope, but a single constituent entity abroad brings you into scope for review. We can confirm your position from the consolidated accounts.

Where the difficulty lies

The intent is simple; the computation is not. Accounting figures are not used as they stand — they must be adjusted to the GloBE rules.

• Recalculated jurisdiction by jurisdiction

  For every jurisdiction with constituent entities, GloBE income and adjusted covered taxes are derived to give an effective tax rate. This is not the accounting tax charge.

• Safe harbours and exclusions

  The de minimis exclusion and the substance-based income exclusion can reduce or remove the top-up. Each condition has to be tested.

• Allocating the top-up

  Where a top-up arises, it must be allocated across the constituent entities that bear it.

• The information return

  A prescribed form (the GIR) with a very large number of data points, filed as XML. A single mismatched field produces an error.

So we built the software ourselves

There are too many fields for a spreadsheet, and this is not a one-off filing. We developed our own preparation tool covering everything from the reporting entity details through to the XML export. It validates entries against the form rules before submission, which removes most of the errors that would otherwise come back from the filing system.

1. 01

   Filing details and group structure

   Reporting entity and group information, and the ownership relationships between constituent entities.

2. 02

   Jurisdictional computation

   GloBE income and adjusted covered taxes by jurisdiction, producing the effective tax rate and any top-up.

3. 03

   Safe harbours and elections

   Testing exclusions and applying the available elections.

4. 04

   Allocation and validation

   Allocating across constituent entities, with the tool checking for breaches of the form rules.

5. 05

   XML export and returns

   Generating the submission XML together with the top-up tax return and the reporting on foreign constituent entities.