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Pillar Two – It’s All About the Interplay

September 6, 2023

By Mark Gasbarra

Understanding Pillar Two (“P2”) and its impact on a company’s global effective tax rate cannot not be measured in isolation – in fact it’s all about the interplay.

P2 is designed to ensure that every multinational enterprise (“MNE”) is subject to a minimum effective tax rate of 15% in every jurisdiction in which they operate.  This effective tax rate is determined is each jurisdiction by dividing the jurisdiction’s Covered Taxes by the jurisdictions GloBE Income.

Conceptually, GloBE Income is relatively straightforward and is determined by adjusting the jurisdiction’s Financial Accounting Net Income or Loss (“FANIL”) by a series of specifically defined adjustments designed to ensure comparability between MNEs.

Calculating Covered Taxes is much more complex and is all about the interplay between overlapping and disparate taxation rights and concepts.  In particular, the three primary areas of interplay are between the financial accounting principles, local country jurisdictional taxable income determination, and finally with CFC regimes such as the U.S. GILTI regime.

Pillar Two Resources

ONLINE WORKSHOP
Nov 27th – Dec 1st

Pillar Two, Part III

Pillar Two, Part II

Pillar Two, Part I

Tax Rate Modeling in the New World of US International Tax

Foreign branch versus CFC and the GILTI high-tax exclusion are two essential modeling imperatives

By Mark Gasbarra

The Complicated Web TCJA Weaves

Listen as we discuss how practitioners navigate the interconnected provisions of the Tax Cuts and Jobs Act, with a strong emphasis on Export Incentives including FDII and the Interest Charge Domestic Sales Corporation.

David D. Stewart, Benjamin M. Willis, and Mark Gasbarra