KPMG report: Accounting for income tax implications of Pillar Two GloBE top-up taxes
A KPMG report that discusses how implementing the new rules and determining the appropriate accounting impacts may be challenging.
The Organisation for Economic Cooperation and Development (OECD) continues to implement the base erosion and profit shifting (BEPS) 2.0 framework, an international tax reform initiative designed, in part, to ensure large multinational enterprise groups pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. Its release of model rules in December 2021 provides a template for countries to implement a top-up tax through the global anti-base erosion (GloBE) rules. Many countries have amended local laws to introduce a top-up tax as part of the initiative, with certain laws becoming effective January 1, 2024.
Unlike traditional income tax regimes, the GloBE top-up taxes are an additional tax based on the difference between a minimum 15% rate and the jurisdiction’s GloBE effective tax rate (ETR). Additionally, because the tax is based on the accounting framework used in the consolidated financial statements, it may result in basis differences that do not exist under local tax law, and local tax law basis differences may not exist for GloBE purposes.
Read a June 2024 report prepared by KPMG LLP that discusses how implementing the new rules and determining the appropriate accounting impacts may be challenging, especially given the volume of GloBE regimes enacted and the recent effective date of many GloBE top-up taxes in a number of jurisdictions.