Italy: Implementation of Pillar Two transitional safe harbors
Transitional country-by-country (CbC) reporting safe harbors for groups subject to the Pillar Two global minimum tax
The Ministry of Economy and Finance on May 20, 2024, issued a decree implementing the transitional country-by-country (CbC) reporting safe harbors for groups subject to the Pillar Two global minimum tax (i.e., multinational enterprise (MNE) groups and large-scale domestic groups with revenues exceeding €750 million in at least two of the four fiscal years preceding the relevant fiscal year).
The CbC reporting safe harbors are optional transitional regimes that can be applied in the initial phase of the new global minimum tax rules—which is the first three fiscal years beginning by 31 December 2026 and ending by 30 June 2028 (i.e., 2024, 2025, and 2026 for groups that have a calendar tax year)—to mitigate the administrative and compliance burdens of the global minimum tax.
Under the simplified rules, passing at least one of the three different tests for a given jurisdiction in a given fiscal year is sufficient to consider that jurisdiction as low-risk and consequently reduce the group’s top-up tax to zero (in that jurisdiction and for that fiscal year), without the need for the ordinary calculation of the effective tax rate (ETR) and any top-up tax. The three tests are de minimis test, simplified ETR test, and routine profit test.
Read a June 2024 report prepared by the KPMG member firm in Italy