IFRS reporters - BEPS Pillar 2 - Deferred tax exemption and disclosures

BEPS Pillar Two - Global minimum top-up tax - IAS12 amendments - IASB Exposure Draft

BEPS Pillar Two – IASB Exposure Draft

The momentum around BEPS Pillar Two minimum tax continues to gather pace with EU approval and releases from the OECD (particularly on safe harbours) both in December 2022. Pillar Two is timetabled to apply in the UK to accounting periods beginning on or after 1 January 2024. The IASB (International Accounting Standards Board) has continued to advance proposals to amend IAS 12 in relation to IFRS tax accounting for Pillar Two following concerns raised by stakeholders. An IASB Staff Paper was issued in November 2022 and now the IASB has issued an Exposure Draft of the proposed amendments to IAS 12 for comments until 10 March 2023. These amendments are expected to be adopted by the end of June 2023 and the deferred tax exemption applies from adoption.

A previous article entitled ‘IASB issues accounting paper on BEPS Pillar Two’ published in November 2022 provides information on the Staff Paper. Then, following the publication of the new Exposure Draft, the KPMG International Standards Group (ISG) published updated Commentary and a talkbook.

The proposed amendments to IAS 12 comprise two key elements: i) a temporary mandatory exception from accounting for deferred tax related to top-up tax applying from adoption; and ii) new disclosures, particularly before the top-up tax rules come into effect, which apply to annual reporting periods starting on or after 1 January 2023.


These proposed amendments can be illustrated with an example 31 December year end group which, through the jurisdictions it operates, Pillar Two minimum tax is substantively enacted during the year ended 31 December 2023 and applies from 1 January 2024. In this example, the expected impacts of the IAS 12 proposed amendments are as follows:

Year ended 31 December 2022

  • The proposed amendments to IAS 12 do not yet apply. The group is still strongly encouraged to consider disclosure of qualitative information if they expect the Pillar Two Global Anti-Base Erosion (GloBE) rules to affect them.

Year ending 31 December 2023

  • Mandatory exception from accounting for deferred tax on top-up applies.
  • New disclosure requirements apply which comprise:
    • Information on legislation substantively enacted to implement Pillar Two for the group;
    • A list of ‘low-tax jurisdictions’ with an IAS 12 Effective Tax Rate (ETR) below 15 percent and, in aggregate, information about the profit before tax, income tax expense and weighted-average ETR of these; and
    • Information on other jurisdictions where the company may be exposed to top-up tax and an indication where no top-up tax exposure in a current ‘low-tax’ jurisdiction.

Year ending 31 December 2024

  • Mandatory exception from accounting for deferred tax on top-up tax continues to apply; and
  • As top up tax now applies to the group, disclosure of the current tax expense related to top-up tax.

Next steps

Groups should continue to assess the impact of Pillar Two GloBE rules to identify any top up tax liability and how the detailed data required will be captured effectively to support these new disclosure requirements, group tax reporting and compliance. KPMG is working extensively with groups on these areas and transformation implications.