With Pillar Two compliance deadlines approaching fast, business leaders can turn a new legal obligation into a competitive advantage by reimagining their approach to tax governance and refining or redesigning their target operating model. To meet Pillar Two requirements, companies must generate, gather and manage more data than ever before. The ability to leverage these expanded data sets can become a business advantage, transforming a regulatory burden into an opportunity for short and long-term planning and strategic business restructuring.
Strategic implications of Pillar Two compliance
For multi-jurisdictional businesses, tax compliance has traditionally been a significant yet manageable aspect of multinational operations. However, with the introduction of Pillar Two requirements, the landscape is undergoing a seismic shift. This framework part of the broader BEPS initiative developed by the OECD, imposes a minimum tax rate of 15% on multinational entities. This development is not just a routine change; it represents a fundamental transformation in how businesses approach tax obligations across international borders.
As businesses scramble to adapt to these new rules, the additional workload is undeniable. Companies are now facing the daunting task of gathering, generating and managing more data than ever before, necessitating significant enhancements in their IT and tax technology infrastructures, as well as overall data gathering processes. These data sources are also more varied and no longer restricted to traditional enterprise resource planning (ERP) sources such as trial balances and general ledger accounts.
How can Pillar Two compliance offer new business opportunities?
This article explores how business leaders can turn Pillar Two compliance into a competitive advantage by innovating their tax governance frameworks and utilizing expanded data sets for strategic planning and restructuring efforts.
Key takeaways
- Business leaders can turn a new legal obligation under Pillar Two into a competitive advantage by reimagining their approach to tax governance and leveraging expanded data sets for strategic business planning.
- Pillar Two significantly increases the compliance burden on MNEs. Companies need to establish a centralized process to ensure the timely filing of all returns and notices and to improve efficiency.
- Companies must generate, gather and manage more data than ever before. Technology can play a key role by making the data collection process as streamlined as possible. These tools should output numbers but also provide custom inputs and custom scenario modeling.
- The impacts of Pillar Two are large and complex. Best practices for readiness include a project plan covering impact assessment, data sourcing, operating model and compliance, among other things.
- Pillar Two compliance is not just about meeting new legal requirements; it’s about reimagining the tax function as a pivotal component of modern corporate strategy.
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Zubair Patel
Head of Tax and Legal, KPMG's CASA region, and Head of Tax & Corporate Services
KPMG in Kuwait
