BEPS 2.0 Pillar 2: The global minimum tax rate

Following the OECD's BEPS initiative (Base Erosion and Profit Shifting), the successor project BEPS 2.0 is now being implemented. Pillar 1 includes measures for the reallocation of taxation rights affecting multinational groups with an annual revenue exceeding EUR 20 billion which is a relatively small group. The implementation details of Pillar 1 are currently still pending.

Pillar 2 addresses the introduction of a global minimum tax. At the end of 2021, OECD countries agreed on the plan to introduce a minimum tax applicable to all multinational groups with consolidated group revenues of at least EUR 750 million.

Following the adoption of the BEPS measures at  OECD level, countries are now required to establish a legal basis for the agreed-upon rules. A political agreement was reached in the EU in mid-December 2022, and corresponding legislative projects have also been initiated in non-EU countries. The legislative changes necessitate intensive preparations by the taxpayers. The Safe Harbour regulations introduced by the OECD, which are simplified rules applicable for a transitional period, can provide partial relief, but companies should nevertheless act promptly and create appropriate processes and structures.

The global minimum taxation is intended to oblige companies with a consolidated group revenue of EUR 750 million or more to calculate an effective tax rate (ETR) for each country. If the ETR is below 15 %, a "top-up tax" must be paid. Notably, the ETR can fall below 15% even if the statutory tax rate in the respective country exceeds this threshold. Regardless of whether an actual minimum tax is incurred, companies will face extensive documentation and compliance obligations.

A significant challenge lies in the availability and collection of relevant data. Much of the data that is relevant for the new regulations is not captured in existing documentation such as country-by-country reporting or commercial balance sheets. New processes and comprehensive adjustments to the information provided by group accounting are necessary to efficiently collect the required data. Additionally, all subsidiaries of a multinational group must be considered, necessitating close international co-operation between tax and accounting departments. Practical experience indicates that globally active medium-sized companies, in particular, need to develop the required structures. Given the limited time, immediate implementation is essential.

The global minimum taxation came into force in the main EU member states and several other countries (e.g. the UK, Switzerland, Turkey, etc.) in 2024. You can find a continuously updated implementation status here.

For German companies, the first declaration obligation is to register the so-called German Pillar 2 group leader. This registration must be submitted to the Federal Central Tax Office by 28 February 2025, if the financial year aligns with the calendar year.

In addition, KPMG has developed a global, cloud-based technology solution to support the collection and provision of relevant data as well as to facilitate Pillar 2 calculations: KPMG BEPS 2.0 Automation Technology (KBAT). This solution, not only enables the calculation of GloBE income/loss etc. according to the Income Inclusion Rule (IIR), but also calculation of the Qualified Domestic Minimum Top-up Tax (QDMTT) for individual countries. In addition, KBAT also allows for the classification of Constituent Entities, scenario comparisons and offers various possibilities to analyze calculation results. We are already capable of producing the XML file expected to be used for the submission of the Globe Information Return. By embedding KBAT in the KPMG Digital Gateway platform, additional tools are available, such as our comprehensive Legal Entity Management and our Smart Questionnaire application, which has been customised for Pillar 2 purposes. Furthermore, our GenAI Assistant, ca answer Pillar 2-specific questions in all languages, significantly reducing the workload of your organisation.

KPMG has developed a project approach that considers a company’s specific tax, accounting and IT landscape. Unlike many tax projects, the efficient implementation of Pillar 2 requirements requires specialised accounting expertise (especially IFRS). At KPMG, we have the requisite expertise, with relevant experts consistently integrated into our project teams.

Projects in the BEPS 2.0 environment typically require individual solutions as each company is unique. Our team of experts in accounting, IT and international tax approaches the projects in an interdisciplinary manner, always considering audit requirements. By leveraging our Pillar 2 solutions and collaborating with renowned third-party providers, we deliver innovative solutions tailored to your needs. In doing so, we integrate seamlessly with your existing infrastructure, usually without the need to convert your current IT system. You also benefit from our international network. We work closely with this network to meet the requirements of the countries relevant to you.