We recently wrote an article detailing exactly what Pillar Two is and how it is going to change the way that international businesses are taxed which can be read here.
However, we wanted to go into more detail examining the way that businesses should react to Pillar Two, both to stay compliant and maintain their profit margins.
For businesses falling within the scope of Pillar Two, the first step is a thorough assessment to determine how the GloBE rules apply to their operations.
This involves reviewing global revenue figures, assessing the tax implications in each jurisdiction they operate in, and understanding the specific requirements of the Global Minimum Tax.
Compliance with Pillar Two will demand strategic planning on your part.
Businesses should consider revisiting their corporate structures, financing arrangements, and operational models to align with the new tax landscape.
Transparency and proactive engagement with tax authorities will be key to successfully navigating this transition.
In the long term, businesses may need to reassess their global footprint, considering the implications of Pillar Two on their overall tax strategy.
This might include consolidating operations in certain jurisdictions or re-evaluating the locations of intellectual property holdings.
Tax and financial experts will be key in helping you understand and follow Pillar Two’s detailed rules and can offer the know-how needed to make sure your business complies with these regulations while making the most of its finances.
Potential impact of Pillar Two on smaller businesses
Whilst the current scope of Pillar Two is set firmly on businesses over the €750 million revenue threshold, our team are aware that regulations like this have the potential to expand.
If your business is international, albeit of lower revenue, it’s still best to discuss Pillar Two with your tax adviser.
If your business is currently structured in such a way that you are mitigating your Corporate Taxes through strategic geographical positioning, you are likely under increased regulatory and compliance scrutiny as a result.
As such, you should be in regular discussions with an international tax adviser on your regulatory compliance strategies already.
If you are not already maximising your tax efficiency through geographic positioning and you’d like to discuss this, we can guide you further.
To discuss anything related to Pillar Two, or for help mitigating your current taxes, please reach out to one of our team.
