Streamlined tax reporting: How Pillar II might provide you with an opportunity - Tax and Legal blog


The OECD Global Minimum Tax regime (“GloBE”) is a headache for most organisations. Also known as Pillar II, the ruleset is complex and still moving, the data requirements to perform the calculations are far-reaching, and the timeline is ambitious. For impacted groups the implementation of a solution to this reporting challenge requires new resources with scarce skillsets.

But what if Pillar II also brings benefits?

New insights into your organisation’s tax positions provide opportunities to optimise and streamline your tax structure. Transparent reporting of a fair and appropriate allocation of profits and tax contribution enhances your reputation with stakeholders and customers.

In addition, the implementation you choose for Pillar II can act as a catalyst for change to a streamlined, more efficient tax reporting function.

For some international groups, preparations for the GloBE regime are well under way. There are many compliance solutions already available on the market and the existing regulations and guidance are becoming well understood from a technical perspective. There are, however, several hurdles still to overcome.

Firstly, resource and timing

Pillar II reporting will need to fit into the existing direct tax reporting cycle. When resources are already stretched to close quarterly, half-year and annual accounts, they will also need to finalise Pillar II calculations to include in provisions and disclosures within those few hours and days.

This includes understanding applicable rules and implementation status as of each balance sheet date, performing data gathering and consolidation, populating calculation engines, reviewing results on jurisdictional and group levels, dealing with late adjustments that impact Pillar II calculations and drafting disclosure texts.

The GloBE return will need to be completed in addition to local direct tax return filings and will result in its own set of true-ups and adjustments on top, that themselves lead into the direct tax provisions.

Secondly, data requirements

For the Pillar II calculations and return the source data points exceed any existing reporting regime and will most likely come from several data sources. In many cases an analysis will already have been done of the hundreds of data points required and the gap that needs to be closed to ensure completeness. Each data point needs to be identified, included in the gathering process, and be subject to sufficient controls to ensure high data quality.

Even in the case of an outsourced compliance route, the data collection will remain a challenge for the organisation.

Thirdly, process setup

Most tax regimes require data collection, consolidation, cleansing, calculations, reporting and monitoring. These now need to be newly defined for Pillar II around a technology solution and embedded within the existing infrastructure. The design of this entire process is critical to ensuring a successful implementation and compliance with the regime. New interfaces between tools need to be built, teams need upskilling, control frameworks need expanding.

So how can you overcome these challenges and gain an advantage?

Despite these hurdles an efficient implementation is possible and the key is to look outside of the Pillar II requirements at the finance and tax processes already in place. Not only does this enable a truly embedded Pillar II process that makes best use of existing data sources and solutions. It can also lead to the identification of synergies across other tax calculations and reporting mechanisms. This provides an opportunity to improve tax provisioning, tax compliance and operational transfer pricing processes that leverage the enhanced data gathering and cleansing processes implemented for Pillar II.

Imagine having all the data required for your tax provision at the touch of a button, leaving you time to focus on judgemental adjustments and understanding local movements. Imagine an automated reconciliation between your financial accounts and the GloBE effective tax rate that provides you with new insights into how tax attributes interact. Imagine having late accounting adjustments flow directly to amended profit allocations at the local level.

Fortunately, global software vendors are stepping up to the challenge and creating tools and new modules that deal with the specific technicalities of Pillar II, link the data points to tax provision solutions and provide sophisticated workflow management functionality.

What are the main factors for success?

  1. Designate and prioritise the quality and granularity of tax data upstream in your finance systems so it is correct at source and can be extracted and used without further manual correction. This enhanced data can be used throughout tax and other finance processes without needing onerous manual corrections at each stage.
  2. Implement an end-to-end process covering data gathering right up to reporting. Use appropriate technology solutions that cover tax accounting, direct tax and transfer pricing compliance, as well as the Pillar II requirements. This should incorporate existing solutions, ensuring no duplication or redundancy, and providing automated interfacing.
  3. Ensure that monitoring of status and key output attributes is part of the real-time data flow within the automated process and requires no additional manual effort to obtain. Oversight of Pillar II and other tax results should be immediate and comprehensive.

The result will be an interconnected, streamlined, efficient process that is future-proof and robust.

Switzerland is one of the jurisdictions of particular focus for Pillar II as the transitional safe-harbour thresholds are often not met. This means that the Swiss market is gaining insights and experience at a rate faster than many other European jurisdictions. Being in a jurisdiction with a potential top-up tax liability increases scrutiny and with it the risks associated with non-compliance.

The provisions required from 2024 onwards are focussing the best minds on how to comply with the GloBE requirements while leveraging scarce resources.

Technology, and specifically process redesign, is proving to be the key differentiator in how organisations approach the challenge.

Will you treat Pillar II as just an additional compliance cost, requiring additional resources and more time? Or will you start now and seize the opportunity to transform your tax function, reduce risk, limit costs and derive new insights in the long run?

If you would like to discuss more on this topic, please do reach out to our key contacts below.

Key contacts

Ilan Rom - Partner
Financial Services Tax

Brandi Caruso - Partner
Tax Accounting

Sarah Rathgeb - Senior Manager
Tax Technology Automation Lead

Karim Schubiger_110
Karim Schubiger - Director
Tax Technology Consulting Lead

From DPN_110
Lukas Kuettel - Senior Manager
Tax Technology Growth Lead



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