BEPS 2.

0 and Pillar Two

implementation
developments
EY global webcast

31 January 2024
Disclaimer

► This material has been prepared for general informational and educational purposes only and is not intended, and
should not be relied upon, as accounting, tax, legal or other professional advice. Please refer to your advisors for
specific advice.

► Neither the EY organization nor any of its member firms shall bear any responsibility whatsoever for the content,
accuracy, or security of any third-party websites that are either linked (by way of hyperlink or otherwise) or
referenced in this presentation.

► The views of third parties set out in this webcast are not necessarily the views of the global EY organization or its
member firms. Moreover, they should be considered in the context of the time they were made.

Page 2
Objectives

► Panelists will discuss the latest developments on BEPS 2.0 and what to expect in the coming months, with a focus on
how these developments affect companies.

► During this session, participants will be able to hear panelists talk about the additional Administrative Guidance on
the Global Anti-Base Erosion (GloBE) Rules.

► Participants will be able to:

► Hear about the path of ongoing Pillar Two implementation activity around the world.

► Discuss the latest Pillar Two Administrative Guidance from the Inclusive Framework.

► Learn about the current status of Pillar One Amount A and Amount B.

► Review what is still to come from the Inclusive Framework on BEPS 2.0.

► Understand the tax accounting and disclosures for Pillar Two.

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Speakers

Jeffrey M. Michalak Ronald van den Brekel

Barbara M. Angus EY Global International Tax
EY Global Transfer Pricing
EY Global Tax Policy Leader and Transaction Services
Market and Innovation Leader
Leader

Matt Andrew Brian Foley Jose A. Bustos

EY Asia-Pacific Tax Policy EY Global Tax Accounting
EY Global BEPS Desk Leader
Leader and Risk Advisory Services
Leader

Page 4
Agenda

01 Pillar Two implementation around the globe

02 Update on Pillar Two Administrative Guidance

03 Update on Pillar One

04 Ongoing Inclusive Framework activity

05 Pillar Two tax accounting and disclosures

01 Pillar Two implementation around the globe
 Poll question 1 of 7
Which region’s activity with respect to the implementation of
Pillar Two is most relevant for your organization?

Please submit your answer in the pop-up window.

Asia-Pacific: Pillar Two implementation status

No announcements No announcements and

Legislation enacted for Expected to implement in 2024 Expected to implement for 2025
but expected to not clear whether will
2024
implement implement

Australia Malaysia China Philippines

Draft legislation expected in Legislation implemented Mainland
mid 2024 IIR and QDMTT effective from
Korea 1 January 2025
Legislation implemented
Income Inclusion Rule (IIR) effective 1
January 2024 and Under-Taxed Profits
Rule (UTPR) effective 1 January 2025
New Zealand Hong Kong SAR India Laos
(subject to enforcement decree) Draft legislation published Announced implementation for 1
January 2025
Pillar Two Public Consultation Paper
published on 21 December 2023

Thailand Cambodia
Japan
Legislation implemented Announced implementation for
1 January 2025
IIR effective 1 April 2024

Singapore Myanmar
Announced implementation for
1 January 2025
Vietnam
Legislation implemented
IIR and Qualified Domestic Minimum
Indonesia
Top-up Tax (QDMTT) effective from 1 Draft legislation expected in 2024
January 2024

Many Asia-Pacific jurisdictions are already implementing Pillar Two or are expected to do so.
Status as of 19 January 2024
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Europe, Middle East, Africa: Pillar Two implementation status

Legislation enacted for 2024

Austria Czech Republic Germany Liechtenstein Norway Slovenia United Kingdom

IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 1 IIR and QDMTT effective from IIR and QDMTT effective from 31 IIR and QDMTT effective
December 2023. UTPR effective December 2023. UTPR effective December 2023. UTPR effective January 2024. UTPR effective 31 December 2023 December 2023. UTPR effective from 31 December 2023
from 31 December 2024 from 31 December 2024 from 31 December 2024 from 1 January 2025 from 31 December 2024

Belgium Denmark Hungary Luxembourg Qatar Sweden

IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 Detailed provisions and IIR and QDMTT effective from 31
December 2023. UTPR effective December 2023. UTPR effective December 2023. UTPR effective December 2023. UTPR effective regulations are expected to December 2023. UTPR effective
from 31 December 2024 from 31 December 2024 from 31 December 2024 from 31 December 2024 be developed in the future from 31 December 2024

Bulgaria Finland Ireland Mauritius Romania

IIR and QDMTT effective from
IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 QDMTT detailed provisions and IIR and QDMTT effective from 31
Switzerland
31 December 2023. UTPR QDMTT effective from 1
December 2023. UTPR effective December 2023. UTPR effective regulations are expected to be December 2023. UTPR effective
effective from 31 December January 2024.
from 31 December 2024 from 31 December 2024 developed in the future from 31 December 2024
2024

Croatia France Italy Netherlands Slovakia United Arab Emirates

IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 IIR and QDMTT effective from 31 Detailed provisions and regulations
QDMTT effective from 31
December 2023. UTPR effective December 2023. UTPR effective December 2023. UTPR effective December 2023. UTPR effective are expected to be developed in
December 2023
from 31 December 2024 from 31 December 2024 from 31 December 2024 from 31 December 2024 the future
Status as of 19 January 2024
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Europe, Middle East, Africa: Pillar Two implementation status

Deferred until 2030 as allowed under the EU Announced intention to implement Pillar
Draft legislation
Directive Two

Estonia Gibraltar
Cyprus
IIR effective from 31 December Spain
2023. UTPR effective from 31 IIR and QDMTT effective from
December 2024 and QDMTT 31 December 2023. UTPR
effective from 1 January 2025 effective from 31 December
2024 Latvia Guernsey

United Kingdom Switzerland Lithuania Isle of Man

UTPR effective from 31
IIR and UTPR effective from 1
December 2024
January 2025

Malta Jersey

Slovakia South Africa

Greece

Status as of 19 January 2024

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Americas: Activity related to Pillar Two

Bahamas Barbados Bermuda Canada United States

Public consultation on Draft legislation for 15% corporate income Draft legislation for Guidance on US foreign
potential implementation QDMTT tax, effective for tax QDMTT and IIR tax credit treatment of
of corporate income tax years beginning on or certain Pillar Two taxes;
and QDMTT after 1 January 2025 proposed legislation to
counter UTPRs

Argentina Brazil Chile Colombia Costa Rica Mexico Panama Uruguay

Governments considering Pillar Two

Status as of 19 January 2024

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 Poll question 2 of 7
Which aspect of the Pillar Two global minimum tax rules are you
most focused on?

Please submit your answer in the pop-up window.

02 Update on Administrative Guidance
December 2023 Administrative Guidance

► The December 2023 Administrative Guidance on the Global Anti-Base Erosion (GloBE) Model Rules will be
incorporated into a revised version of the Commentary that will be released in 2024 and will replace the original
version of the Commentary released in March 2022

► Inclusive Framework to continue to release Administrative Guidance on an ongoing basis and develop simplifications
on key compliance items on a timely basis

► Peer review process to be implemented

► Continued work on the administrative framework and dispute resolution mechanisms for the GloBE Rules

► Main topics covered:

► Purchase price accounting adjustments in Qualified Financial Statements
► Further guidance on the Transitional Country-by-Country Reporting (CbCR) Safe Harbour
► Further guidance on the application of the GloBE Rules
► Further guidance on the allocation of Blended Controlled Foreign Company (CFC) Taxes
► Transitional filing deadlines for Multinational Entity (MNE) Groups with short Reporting Fiscal Years
► Simplified calculations Safe Harbour for Non-Material Constituent Entities

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Transitional CbCR Safe Harbour – Recap of mechanics

Transition period: Fiscal years (FYs) beginning on or before 31 December 2026, but not a FY that
ends after 30 June 2028
► Calendar year 2024, 2025, 2026
► “Once out, always out”: Once not applied for a fiscal year for a jurisdiction, no application for subsequent years
► Not dependent on first year that GloBE Rules become applicable to a group
► Data sources: Qualified CbCR and Qualified Financial Statements

During the transition period, the top-up tax is deemed to be zero for a jurisdiction for the fiscal year where at least
one of the following tests is met:

De Minimis Test Simplified Effective Tax Rate (ETR) Routine Profits Test
► Total Revenue of less than EUR 10m Test ► PBT equal to, or less than, the
and ► MNE’s Simplified ETR (Simplified Substance-Based Income Exclusion
► Profit (Loss) before Income Tax Covered Tax/PBT) equal to, or (SBIE) amount
(PBT) of less than EUR 1m greater than, the Transition Rate:
► 15% for 2023-2024
► 16% for 2025
► 17% for 2026

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Purchase price accounting (PPA) adjustments

Transitional CbCR Safe Harbour rules do not generally require or permit adjustments to
amounts in financial accounts for them to be considered Qualified Financial Statements
► Distortions may be created when PPAs are involved

► If PPA adjustments are allocated and incorporated into the financial accounts of an
acquired CE, the financial accounts are not Qualified Financial Statements for
Transitional CbCR Safe Harbour purposes unless:
► Consistent reporting condition satisfied (i.e., all CbCRs after 31 December 2022
include PPA adjustments, with certain exceptions); and
► Specified goodwill impairment adjustment made (i.e., any expense attributable to
goodwill impairment related to transactions after 30 November 2021 to be added
back to the PBT)

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Further guidance on the Transitional CbCR Safe Harbour – Qualified Financial
Statements considerations

Consistent use of data Using different accounting Adjustments to Qualified Financial

► All of the data of an entity/Permanent standards Statements
Establishment (PE) to come from same ► A CbCR to be considered Qualified even if ► Adjusting data from Qualified Financial
Qualified Financial Statements. based on data from the Ultimate Parent Statements to disqualify jurisdiction from the
► All data used for calculations to come from Entity’s (UPE) Consolidated Financial Transitional CbCR Safe Harbour (exceptions).
the same type of Qualified Financial Statements for some jurisdictions and data
► Intra-group payment treated as income in the
Statements (determined separately for each from local GAAP accounts for other
recipient and expense in the payer to be
jurisdiction). jurisdictions. included in Total Revenues and PBT without
further adjustments.

MNEs not required to file CbCR Qualified Financial Statements for Constituent Entities and Joint
► MNEs in scope of the GloBE Rules but not PEs Ventures (JVs) or members of JV
required to file CbCR still eligible for ► If Qualified Financial Statements not available Groups
Transitional CbCR Safe Harbour if they for a PE, separate Financial Statements
complete the relevant section of the GloBE ► JVs or members of JV Groups to be treated
prepared by the Main Entity for the PE for as being in separate Tested Jurisdictions
Information Return. financial reporting, regulatory, tax reporting from the Constituent Entities (with all
or internal management control purposes members of the same JV Group treated as
may be used. being in the same separate Tested
Jurisdiction).

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 Poll question 3 of 7
Do you expect the Pillar Two rules to have a significant economic
or administrative impact on your organization?

Please submit your answer in the pop-up window.

Further guidance on the Transitional CbCR Safe Harbour –
Mechanics considerations

► Simplified ETR Test clarifications:

► Simplified Covered Taxes: The effect of any uncertain tax position
reflected in a return to provision to be removed
► Simplified ETR computation for PEs: Income tax expense in the PE
jurisdiction on the PE's income can only be included in the simplified
ETR test for the PE jurisdiction
► Allocation of taxes relating to a PE, CFC or hybrid entity: Taxes paid
under a CFC tax regime or a taxable branch regime not required to be
allocated when determining simplified ETR for the jurisdiction of the
Constituent Entity-Owner of Main Entity

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Further guidance on the Transitional CbCR Safe Harbour – Mechanics
considerations (cont’d)

► Routine Profits Test clarifications:

► SBIE to be computed based on the transitional relief rates stated
under Article 9.2
► For 2024, rates are 9.8% and 7.8%

Global Anti-Base Erosion Model Rules (oecd.org), tables page 50

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Administrative Guidance on the application of the GloBE Rules

GloBE Model Rules December 2023 Administrative Guidance

Consolidated revenue threshold ► Definition to be determined in line with the relevant accounting
standard, before deducting cost of sales and other operating expenses.
► GloBE Rules applicable to MNEs with revenues in two of the past four
years of at least €750m ► If different types of revenue separately presented in the consolidated
profit and loss, they must be aggregated for threshold purposes
► Source is consolidated profit and loss statement of an MNE which can
vary across financial accounting standards and UPE jurisdictions ► Net gains from investments included

Mismatch between Fiscal Years of UPE and another Constituent ► The GloBE computations to be based on the method the MNE uses to
Entity address the discrepancy in fiscal years in its Consolidated Financial
► The Fiscal Year for purposes of the GloBE Rules is generally the Statements
accounting period used by the UPE in the preparation of its ► For entities not included in the Consolidated Financial Statements (e.g.
Consolidated Financial Statements, but mismatches may occur with non-material entities and JVs) the financial accounting period of the
some Constituent Entities UPE should be used

Mismatch between Fiscal Year and Tax Year of Constituent Entity

► The method used in the Consolidated Financial Statements to be used
► MNE to determine its Adjusted Covered Taxes based on its Fiscal to determine the Adjusted Covered Taxes of the Constituent Entity for
Year. In some cases, however, the taxable period of the Constituent the Fiscal Year
Entities in a jurisdiction does not align with the Fiscal Year of the
MNE

Due date for GloBE Information Return filing and notification obligations for any Fiscal Year will not be before 30 June 2026 (even in cases of short Reporting Fiscal Years).
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Hybrid arbitrage arrangements under Transitional CbCR Safe Harbour

► Different sources of financial information allowed under Transitional CbCR Safe Harbour

► Transitional CbCR Safe Harbour does not include guardrails such as in Articles 3.2.7 and 4.1.4 and in
the rules on asymmetric treatment of dividends and distributions in section 2.3 of the February 2023
Administrative Guidance

► New guidance applies to an arrangement in which Constituent Entities are able to account for
income/expenses, gains/losses or taxes under that arrangement in an inconsistent or duplicative
manner and in a way that purports to allow one of them to qualify for the Transitional CbCR Safe
Harbour

► Constituent Entity cannot qualify for Transitional CbCR Safe Harbour as result of entering into a hybrid
arrangement after 15 December 2022
► Jurisdictions unable to apply this date on constitutional grounds or other superior law, may use 18 December
2023

► Further guidance to be developed for GloBE Rules, outside the context of Transitional CbCR Safe
Harbour

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Hybrid arbitrage arrangements

Types of hybrid arbitrage arrangements

► Deduction/non-inclusion arrangement

► Duplicate loss arrangement

► Duplicate tax recognition arrangement

Effect in Transitional CbCR Safe Harbour

► Exclude expense/loss from PBT in Tested Jurisdiction
(Deduction/Non-inclusion and Duplicate Loss)
► Relevant for Simplified ETR, Routine Profits and De Minimis Tests

► Exclude tax expense in Tested Jurisdiction (Duplicate tax recognition)

► Relevant for Simplified ETR Test

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Deduction/Non-Inclusion arrangement

► Arrangement under which Constituent Entity provides credit or makes

an investment in another Constituent Entity

► Expense in Financial Statements of a Constituent Entity

► To the extent that either

► No commensurate increase in revenue/gain in Financial Statements of CE
Counterparty, or
► No commensurate increase in taxable income of CE Counterparty reasonably
expected over life of arrangement
► Exception for Additional Tier One Capital

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Deduction/Non-Inclusion arrangement (book income)

Issue redeemable Example:

preference shares
► Low Tax Jurisdiction (LTJ) CE acquires assets (e.g., shares of other
CEs) from High Tax Jurisdiction (HTJ) CE
► The acquisition is funded by issuance of redeemable preference
HTJ CE LTJ CE shares (RPS) to HTJ CE
► Transaction occurs before transition date
Transfer CEs ► Under the GAAP applicable to LTJ CE, RPS accounted for at Net
Present Value
► As a result, finance expense is recognized by LTJ CE

Transitional CbCR Safe Harbour effect:

► Deduction/Non-Inclusion Arrangement: Expense included in LTJ
LTJ
LTJCE
CE CE book income, not in HTJ CE book income.
Other CEs ► However, arrangement respected because of grandfathering.
Therefore, expense in LTJ CE Financial Statements and CbCR
respected for Transitional CbCR Safe Harbour.

The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, legal or other professional advice.

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Deduction/Non-Inclusion arrangement (Corporate Income Tax)

Example:
A Co 1 ► A Co 1 provides loan to LTJ CE, which reduces book income of LTJ CE and increases
book income of A Co 1.
► LTJ CE is disregarded entity (under domestic provisions) from the perspective of A Co
2, thus interest expense of LTJ CE allocated to A Co 2 for domestic tax purposes.

Transitional CbCR Safe Harbour effect:

A Co 2 Loan ► Deduction from book income of LTJ CE and taxable income of A Co 2
► Commensurate increase in taxable income of A Co 1
► No commensurate increase based on Article 74.30 (d) (ii) : payment that gives rise to
the expense (for LTJ CE) also gives rises to taxable deduction for a Constituent Entity
(A Co 2) located in same jurisdiction as Constituent Entity counterparty (A Co 1)
without being included as an expense in determining the PBT for that jurisdiction
► There is no expense in determining the PBT of A Co 2, as LTJ CE is disregarded
LTJ CE
entity only for tax purposes and not for Transitional CbCR Safe Harbour purposes
► Conclusion: Deduction/Non-Inclusion arrangement

The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, legal or other professional advice.

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Duplicate loss arrangement

► Arrangement that results in expense/loss included in Financial Statement of a Constituent Entity to extent either:
► Double book deduction: Expense/loss also included in Financial Statement of another Constituent Entity, or
► Book and Corporate Income Tax (CIT) deduction: Duplicate amount deductible for determining taxable income of
another CE in another jurisdiction

► Exceptions to double book deduction rule:

► To extent relevant expense offset against revenue in Financial Statements of both Constituent Entities
► If all Constituent Entities located in same Tested Jurisdictions, no adjustment with respect to the expense in
Financial Statements of one of the Constituent Entities

► Exception to book and CIT deduction rule: to extent relevant expense offset against revenue/CIT income included in
both
► Financial Statements of Constituent Entity including expense in Financial Statements, and
► CIT income of Constituent Entity claiming tax deduction

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Duplicate loss arrangement (book and CIT)

► A Co has CEs in LTJ likely subject to top-up tax

► Third party loan post 15 December 2022 to B Co in LTJ
► B Co has interest expense deductible in Financial Statements
A Co
► B Co is Disregarded Entity (DRE), hence interest expense also tax deductible in A Co’s
jurisdiction
► GloBE (Article 3.2.7):
► No disallowance of interest expense if incurred in favor of third party
► Local tax treatment in A Co’s jurisdiction irrelevant
External
loan ► Transitional CbCR Safe Harbour:
B Co ► Also applicable to third party arrangements
C Co
DRE
► Deductible in Financial Statements of B Co and deductible in taxable income of A
Interest LTJ LTJ Co: duplicate loss arrangement (74.28 b)
expense
► Tax disallowance of interest expense in LTJ not relevant
► Expense excluded from PBT in Transitional CbCR Safe Harbour in LTJ (74.26 a)
► Effect on LTJ: Simplified ETR Test, Routine Profits Test, De Minimis Test
► Consider effect on A Co Simplified ETR Test
The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, legal or other professional advice.

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Duplicate Tax Recognition arrangement

► Arrangement that results in more than one Constituent Entity including part/all of same income tax
expense in either
► Adjusted Covered Taxes, or
► Simplified ETR for Transitional CbCR Safe Harbour
► Unless income subject to tax included in Financial Statements of each Constituent Entity
► Exception: if Simplified ETR Test does not require adjustments for income tax expense that would be
allocated to another CE when determining Adjusted Covered Taxes of first CE

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Definitions relevant for hybrid arbitrage arrangements

► This new guidance applies to arrangements entered into after 15 December 2022:

► Date of the arrangement will be considered to be after 15 December 2022 if after that date:
► Arrangement is amended or transferred
► Performance of any rights or obligations differs from performance prior to 15 December 2022,
including where payments reduced/ceased with effect of increasing liability
► Change in accounting treatment with respect to arrangement

► No commensurate increase in taxable income to extent either

► Amount is offset by tax attribute (loss carryforward, unused interest carry forward) with valuation
adjustment or accounting recognition adjustment, or
► Payment also gives rise to taxable deduction of CE located in same jurisdiction as CE counterparty
without inclusion as expense in PBT

► Expense/loss not considered included in Financial Statements of a Tax Transparent Entity to extent
expense/loss included in Financial Statements of its CE owners
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Further administrative guidance on the allocation of blended CFC taxes

[
Blended CFC Allocation Key* Applicable Rate GloBE Jurisdictional ETR
[ x Attributable Income of CE

Transitional CbCR Safe Harbour Replace with Simplified ETR

No Blended CFC
Simplified ETR Test pushdown

Transitional CbCR Safe Harbour De Replace with Simplified ETR

Potential for Blended
Minimis Test or Routine Profits Test CFC pushdown

Replace with Jurisdictional ETR as computed

for purposes of the QDMTT jurisdiction’s GloBE
Potential for Blended
QDMTT Safe Harbour legislation, except that any “creditable QDMTT
CFC pushdown
payable” should be added to the numerator to
re-compute the jurisdictional ETR

*Where an MNE Group has two or more “blending groups” that have separate jurisdictional ETRs, the Blended CFC Allocation Key for a given CFC should
be calculated using the jurisdictional ETR for the blending group that includes that CFC.

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03 Update on Pillar One
 Poll question 4 of 7
Which aspect of the Pillar One nexus and profit allocation rules
would have the potential to be most impactful to your
organization?

Please submit your answer in the pop-up window.

Pillar One — Amount A developments

Release of Multilateral Convention (MLC) and Explanatory Statement

► Text of MLC, Explanatory Statement and Understanding on the Application of Certainty were approved for
publication by the Inclusive Framework and released on 11 October 2023:
► MLC text represents consensus reached by Inclusive Framework jurisdictions, but it also reflects divergent views
of some jurisdictions on several specific matters, so it is not ready for signature
► Documents contain new details not reflected in prior Amount A consultation documents, including:
► New autonomous domestic business exemption and defense group adjustment
► New provisions on treatment of withholding taxes under marketing and distribution safe harbor and relief from
double taxation
► More specifics on commitment to withdraw Digital Services Taxes (DSTs) and relevant similar measures
► More specifics on process with respect to MLC signature, ratification and entry into effect

Expiration of standstill agreement on enactment of new DSTs and relevant similar measures
► October 2021 agreement not to impose new DSTs or relevant similar measures expired on 31 December 2023
► Conditions for a one-year extension of the standstill set out in a July 2023 agreement had not been met

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Pillar One — Amount B developments

► Consultation Document on Amount B was approved by the Inclusive Framework and released on 17 July 2023:
► Reflects significant further development since the first Amount B Consultation Document that was released in
December 2022, including modifications that are responsive to stakeholder comments on the first document
► Does not yet reflect consensus of Inclusive Framework, with significant open matters to be resolved, including:
► Categories of transactions to be covered
► Scope parameters — the document includes two alternative scoping approaches, one more quantitative and
one more qualitative
► Pricing specifics
► Application — safe harbor or mandatory for taxpayers; optional or mandatory for tax administrations
► Interconnection with Amount A

► Inclusive Framework has been considering the stakeholder comments that were submitted and working to resolve the
open matters to reach agreement on Amount B, with a target of incorporating Amount B into the OECD Transfer
Pricing Guidelines as early as January 2024

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04 Ongoing Inclusive Framework activity
 Poll question 5 of 7
In addition to Pillars One and Two, what other global tax policy
development are you watching most closely?

Please submit your answer in the pop-up window.

Ongoing Inclusive Framework activity

Pillar Two
► Development of additional Administrative Guidance
► Incorporation of Agreed Administrative Guidance into revised Commentary to GloBE Model Rules
► Peer review process for evaluation of jurisdictions’ GloBE implementation
► Procedural mechanisms with respect to GloBE Information Return
► Further consideration of dispute prevention and dispute resolution mechanisms

Pillar One
► Agreement and finalization of Amount A MLC and Explanatory Statement — target by end of March 2024
► Signing ceremony for Amount A MLC — target by end of June 2024
► Agreement and finalization of report on Amount B for incorporation into OECD Transfer Pricing Guidelines

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05 Pillar Two tax accounting and disclosures
 Poll question 6 of 7
What have you done to prepare for the new reporting and
compliance requirements associated with Pillar Two rules?

Please submit your answer in the pop-up window.

GloBE Rules — Tax accounting and reporting guidance

IFRS
► The International Accounting Standards Board (IASB) issued a temporary exception from the requirements in IAS 12,
Income Taxes, to account for deferred taxes arising from substantive enactment of the GloBE Rules:
► The exception applies until the IASB either removes the exception or makes it permanent
► The amendment requires proposed disclosures for periods in which GloBE legislation is enacted or substantively
enacted but not yet in effect:
► Disclose that deferred taxes are temporarily excepted and known or reasonable estimate of potential exposure
to Top-up Tax under the GloBE Rules which may be reflected as a range
► After the effective date of GloBE legislation, the amendment requires disclosure GloBE current tax
► Individual countries may require endorsement of the amendment before it becomes effective

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GloBE Rules — Tax accounting and reporting guidance (cont’d)

US GAAP
► Financial Accounting Standards Board (FASB) concluded the Top-up Tax under the GloBE Rules is an alternative
minimum tax under ASC 740, Income Taxes. GloBE Top-up Tax should be recognized in the period it arises and
deferred tax assets and liabilities should not be recognized for future effects of the tax.

Other Considerations
► Consider other disclosure frameworks, for example, local public company disclosure requirements such as Securities
and Exchange Commission (SEC) Regulation S-K Item 303 requires the disclosure in a registrant’s management
discussion and analysis (MD&A) of prospective information that is reasonably likely to have a material impact.

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GloBE Rules — (Substantively) enacted laws and IAS endorsements

IFRS US GAAP
QDMTT IIR UTPR IAS 12
Sub. Enacted Enacted
No. Country
As of As of Local GAAP
Adopted Entry into effect Adopted Entry into effect Adopted Entry into effect
31-Dec-23 31-Dec-23 endorsement
1 Austria  31-Dec-23  31-Dec-23  31-Dec-24   
2 Belgium  31-Dec-23  31-Dec-23  31-Dec-24   
3 Bulgaria  31-Dec-23  31-Dec-23  31-Dec-24   
4 Croatia  31-Dec-23  31-Dec-23  31-Dec-24   
5 Czech Republic  31-Dec-23  31-Dec-23  31-Dec-24   
6 Denmark  31-Dec-23  31-Dec-23  31-Dec-24   
7 Finland  31-Dec-23  31-Dec-23  31-Dec-24   
8 France  31-Dec-23  31-Dec-23  31-Dec-24   
9 Germany  31-Dec-23  31-Dec-23  31-Dec-24   
10 Hungary  31-Dec-23  31-Dec-23  31-Dec-24   
11 Ireland  31-Dec-23  31-Dec-23  31-Dec-24   
12 Italy  31-Dec-23  31-Dec-23  31-Dec-24   
13 Japan X Not applicable  1-Apr-24 X Not applicable   X
14 Liechtenstein  1-Jan-24  1-Jan-24  1-Jan-25   
15 Luxembourg  31-Dec-23  31-Dec-23  31-Dec-24   
16 Malaysia  1-Jan-25  1-Jan-25 X Not applicable   
17 Netherlands  31-Dec-23  31-Dec-23  31-Dec-24   
18 Romania  31-Dec-23  31-Dec-23  31-Dec-24  X 
19 Slovakia  31-Dec-23 Delayed 31-Dec-29 Delayed 31-Dec-29   
20 Slovenia  31-Dec-23  31-Dec-23  31-Dec-24   
21 South Korea X Not applicable  1-Jan-24  1-Jan-25   X
22 Sweden  31-Dec-23  31-Dec-23  31-Dec-24   
23 Switzerland  1-Jan-24 X Not applicable X Not applicable   X
24 United Kingdom  31-Dec-23  31-Dec-23 X Not applicable   
25 Vietnam  1-Jan-24  1-Jan-24 X Not applicable   X
Status as of 31 December 2023
Page 43
 Poll question 7 of 7
What topic would you be most interested in for future episodes in
our ongoing BEPS 2.0 webcast series?

Please submit your answer in the pop-up window.

GloBE Rules — Illustration
No GloBE Rules QDMTT IIR/QDMTT
Low-tax
enacted enacted enacted

Country A Third A UPE

Party Hold Co

75%
25% B POPE
Country B Hold Co

C CE
Country C Hold Co

CE CE CE
D Co 1 D Co 2 D Co 3
Country D
GloBE Low-Tax
Jurisdiction

CE CE
E Co 1 E Co 2
Country E
GloBE Low-Tax
Jurisdiction

The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, legal or other professional advice.

Page 45
GloBE Rules — Illustration (cont’d)
No GloBE Rules QDMTT IIR/QDMTT
Low-tax
enacted enacted enacted

A UPE
Top-up Tax calculation
Country A Third
Party Hold Co In Country D, the jurisdictional ETR is 12.5% (375/3,000):
► The Top-up Tax (TUT) percentage is 2.5% with a total TUT liability of 75 (2.5%
x 3,000)
75%
25% B POPE ► The TUT is allocated to each CE in Country D based on each CE’s GloBE
Country B Hold Co income
D Co 1 D Co 2 D Co 3 Country D Total
25 25 25 75

In Country E, the jurisdictional ETR is 12% (240 / 2,000)

C CE
Country C Hold Co ► The TUT percentage is 3.0% with a total TUT liability of 60 (3.0% x 2,000)
► The TUT is allocated to each CE in Country E based on each CE’s GloBE
income E Co 1 E Co 2 Country E Total
CE CE CE 45 15 60
D Co 1 D Co 2 D Co 3
Country D
GloBE Low-Tax
GloBE income 1,000 GloBE income 1,000 GloBE income 1,000
Jurisdiction Covered taxes 225 Covered taxes 100 Covered taxes 50
“CE TUT” 25 “CE TUT” 25 “CE TUT” 25

CE CE
E Co 1 E Co 2
Country E
GloBE Low-Tax
GloBE income 1,500 GloBE income 500
Jurisdiction
Covered taxes 240 Covered taxes 0
“CE TUT” 45 “CE TUT” 15
The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is not intended, and should not be relied upon, as accounting, tax, legal or other professional advice.

Page 46
GloBE Rules — Illustration (cont’d)
No GloBE Rules QDMTT IIR/QDMTT
Low-tax
enacted enacted enacted

A UPE
Top-up Tax calculation
Country A Third
Party Hold Co In Country D, the jurisdictional ETR is 12.5% (375/3,000):
► The Top-up Tax (TUT) percentage is 2.5% with a total TUT liability of 75 (2.5%
x 3,000)
75%
25% B POPE ► The TUT is allocated to each CE in Country D based on each CE’s GloBE
Country B Hold Co income
D Co 1 D Co 2 D Co 3 Country D Total
25 25 25 75

In Country E, the jurisdictional ETR is 12% (240 / 2,000)

C CE
Country C Hold Co ► The TUT percentage is 3.0% with a total TUT liability of 60 (3.0% x 2,000)
► The TUT is allocated to each CE in Country E based on each CE’s GloBE
income E Co 1 E Co 2 Country E Total
CE CE CE 45 15 60
D Co 1 D Co 2 D Co 3
Country D
GloBE Low-Tax Charging mechanism
GloBE income 1,000 GloBE income 1,000 GloBE income 1,000
Jurisdiction Covered taxes 225 Covered taxes 100 Covered taxes 50 Entity Liable QDMTT IPE IIR UPE IIR IPE IIR Group
for TUT TUT* TUT TUT Offset TUT NCI**
“CE TUT” 25 “CE TUT” 25 “CE TUT” 25
A Hold Co - - 49 (34) 15 (18)
B Hold Co - 45 - - 45
CE CE
E Co 1 E Co 2 D Co 1 25 - - - 25
Country E D Co 2 25 - - - 25
GloBE Low-Tax D Co 3 25 - - - 25
GloBE income 1,500 GloBE income 500
Jurisdiction Subtotals 75 45 49 (34) 135 (18)
Covered taxes 240 Covered taxes 0
*Illustration only. Allocation of QDMTT TUT is determined by local law.
“CE TUT” 45 “CE TUT” 15 **NCI is a “non-controlling interest” adjustment reported by A Hold Co to eliminate 25% of B Hold
The diagram is for illustrative purposes only. It has been prepared for general informational and educational purposes only and is Co sub-group TUT attributed to 3rd Party interest (i.e., 25% of total 70 B Hold Co sub-group TUT
not intended, and should not be relied upon, as accounting, tax, legal or other professional advice. (i.e., D Co 1 and E Co 1))
Page 47
GloBE Rules — Tax accounting and reporting guidance:
2023 Year-end actions and beyond

2023 Year-end
► Communicate with external auditors about anticipated disclosures (Group and Statutory).
► Reconcile tax accounts and ensure disclosures, including disclosure of unrecognized deferred tax assets, are
complete.
► Re-evaluate assertions related to deferred tax asset realization and uncertain tax positions.
► Coordinate statutory reporting to ensure consistent reporting.
Beyond
► Communicate expected ETR and cash tax impact of GloBE based on (substantively) enacted law.
► Monitor legislative developments — changes in tax must be evaluated in the period (substantively) enacted.
► Review local QDMTT laws and confirm Financial Statement requirements for calculations.
► Evaluate GloBE uncertain tax positions.
► Consider GloBE tax sharing agreements.
► Update processes, systems and workflow for GloBE calculations.
► Prepare for GloBE Top-up Tax recalculations.
► Plan for disruption — business changes (e.g., acquisitions, dispositions, restructuring) must be accounted for in the
period they occur.

Page 48
06 Wrap up
Thank you
Sources 1/2

Pages 8-11
EY BEPS 2.0 Pillar Two Development tracker: ey-beps-2-0-pillar-two-developments-tracker
Page 14
OECD: Presentation: Webinar - Economic Impact Assessment of the Global Minimum Tax (January 2024) (oecd.org)
EY Tax Alert: OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules and update on Pillar One Amount A
timeline | EY – Global
Page 15
EY Tax Alert: OECD/G20 Inclusive Framework releases document on safe harbors and penalty relief under Pillar Two GloBE rules | EY - Global
Pages 16-18
EY Tax Alert: OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules and update on Pillar One Amount A
timeline | EY – Global
Page 19
EY Tax Alert: OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules and update on Pillar One Amount A
timeline | EY – Global
Page 20
EY Tax Alert: OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules and update on Pillar One Amount A
timeline | EY – Global
Source table: OECD releases Model Rules on Pillar Two Global Minimum Tax: Detailed review | EY - Global
Pages 21-31
EY Tax Alert: OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules and update on Pillar One Amount A
timeline | EY – Global
Page 34
OECD: Update to Pillar One timeline by the OECD/G20 Inclusive Framework on BEPS and OECD/G20 Inclusive Framework releases new multilateral convention
to address tax challenges of globalisation and digitalisation – OECD

Page 51
Sources 2/2

Page 35
OECD: Tax challenges of digitalisation: OECD invites public input on Amount B under Pillar One relating to the simplification of transfer pricing rules - OECD and
Outcome Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy – 11 July 2023 (oecd.org)
Pages 41-43 / 45-48
US QTD: Quarterly Tax Developments - December 2023 | EY – US
IFRS QTD: EY launches IFRS version of Quarterly Tax Developments publication | EY – Global
US GAAP Technical Line on accounting for Pillar Two: Technical Line - Preparing for a global minimum tax under the OECD’s Pillar Two Global Anti-Base Erosion
model rules | EY – US
IFRS Developments on accounting for Pillar Two: Accounting for BEPS Pillar Two income taxes before IAS 12 is amended | EY – Global Amendments to IAS 12
International Tax Reform Pillar Two Model Rules | EY – Global, Applying IFRS – International Tax Reform - Pillar Two Disclosures | EY - Global

Page 52
Glossary

BEPS: Base Erosion and Profit Shifting MLC: Multilateral Convention

CbCR: Country-by-Country Reporting MNE: Multinational Entity
CE: Constituent Entity OECD: Organisation for Economic Co-operation and
CFC: Controlled Foreign Company Development
CIT: Corporate Income Tax PBT: Profit before tax
DRE: Disregarded Entity PE: Permanent Establishment
DST: Digital Services Tax PPA: Purchase price accounting
ETR: Effective tax rate QDMTT: Qualified Domestic Minimum Top-Up Tax
FASB: Financial Accounting Standards Board RPS: Redeemable Preference Shares
FYs: Fiscal years SBIE: Substance-Based Income Exclusion
GloBE: Global anti-Base Erosion SEC: Securities and Exchange Commission
HTJ: High Tax Jurisdiction TUT: Top-up Tax
IASB: International Accounting Standards Board UPE: Ultimate Parent Entity
IIR: Income Inclusion Rule UTPR: Under-Taxed Profits Rule
JV: Joint Venture
LTJ: Low Tax Jurisdiction
MD&A: Management Discussion and Analysis

Page 53
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