Pillar 2: Roundtable 4: Covered Taxes

Hi All,

As explained before, we are moving from Advocacy (Pillar 2 letters) and Education (Pillar 2 webinars) to Implementation!

We have had some great Roundtables (see below table for topics and summary per Roundtable) and are proud to announce Roundtable 4: Covered Taxes on April 30 (4-5.30 pm CET) with Baker & McKenzie in the role as Subject Matter Expert. In this Roundtable we will discuss the requirements for qualifying local tax as Covered Tax, including discussion on different types of taxes around the world, CFC regimes, Amount B, etc. Closer to date I will follow-up with a message explaining how you can submit questions in relation to Covered Taxes. If you are interested in the Covered Tax Roundtable please register via this link: https://tei.zoom.us/webinar/register/WN_YZgdSwCCSRq9Xg5Zix9XGQ!

Doris Gonzalez-Hurtado │ Mark Tan │ Mathias Knittel │ Juan Carlos Rubio │ Ralf Thelosen

The Roundtables are organized as follows:

• 20 minutes introduction of the topic by Subject Matter Expert
• 10 minutes explanation of different questions in relation to the topic
• 60 minutes roundtable discussion

Roundtable 1 on the Project Approach on January 30.

In the first Roundtable, we explored with a panel of TEI members how some companies are getting organized to deal with Pillar Two planning and compliance, from the perspectives of:

• a US UPE / US-listed MNC
• a CH UPE / non-listed PE & sovereign wealth fund owned
• an EU cooperative UPE / non-listed MNC

The discussions touched on how each type of company started their Pillar Two projects, how each went about securing internal and external resources, dealt with questions on the source of data and the link to Country by Country Report data, as well as the technology being used or being explored for modelling and future compliance.

Roundtable 2 on Safe Harbours on February 29

In the second Roundtable, a Deloitte team shared how they approached Pillar Two readiness with their clients, and the 5 step process covering:

• determining scope,
• calculating GloBE income,
• determining covered taxes,
• calculating ETR and Top-up Tax and
• applying the IIR and UTPR

This 5 step process also incorporated how the various safe harbours would be taken into account (Transitional CbCR Safe Harbour, QDMTT Safe Harbour, Simplified ETR Safe Harbour, De minimis exclusion and the Transitional UTPR Safe Harbour). Finally, Deloitte shared working examples of a US UPE with a Dutch IPE holding EU and non-EU CEs, and a US GILTI example dealing with the Blended CFC rules.

Roundtable 3 on Constituent Entities and Globe Income on March 26

In the third Roundtable, a Loyens & Loeff team shared how they qualification of (Constituent Entities) and calculation of Globe Income under Pillar Two rules, including a careful determination of:

• entity as Constituent Entity or not,
• different qualification of Constituent Entities,
• Ownership percentage and allocable share,
• Ultimate Parent Entity versus Third party investor and
• Excluded dividend / gain from / on short/long term portfolio shareholding

The discussions involved an approach towards Split Ownership structured under Pillar 2 rules and understanding the consequences of countries having enacted P2 legislation (or not) on the applicability of the Charging Rules at different levels in the structure. Finally, Loyens & Loeff shared working examples of the differences between Excluded Dividends and Capital Gains.