Majority of global MNEs on the ‘Pillar Two journey’, data reveals
Almost 90 per cent of organisations have now commenced their BEPS Pillar Two journey, according to a recent Wolters Kluwer global survey.
The most recent quarterly edition of the Wolters Kluwer BEPS Pillar Two Readiness Index report has revealed 88 per cent of surveyed participants have begun their BEPS Pillar Two journey, an 18 per cent increase from last quarter.
The BEPS Pillar Two Readiness Index is a quarterly “pulse check” for gauging readiness across global tax jurisdictions subject to BEPS Pillar Two measures.
The most recent survey was conducted from April to June 2024 and consisted of 87 participants, representing a global cross-section of organisations that meet Pillar Two reporting requirements.
Along with the 18 per cent increase in companies adopting Pillar Two protocol, it was found organisations are also advancing into the mid-later stages of preparation.
The survey revealed 27 per cent of organisations are at the final stage of implementing data and operating models, and 83 per cent of organisations have conducted preliminary impact assessment studies.
The report said this percentage aligns with the overall progression towards readiness for BEPS Pillar Two reporting and compliance.
“This trend reflects significant progress and a proactive approach in addressing the new compliance requirements brought by BEPS Pillar Two,” the report noted.
From the survey, 76 per cent of respondents remain challenged by the complexity of data collection.
In the previous quarterly report, legislative uncertainty was in the top place of main challenges, however it has been replaced with understanding data requirements.
The report said this shift can be attributed to governments being active in establishing guidelines.
“The shift of legislative uncertainty from first to third place from previous quarter is due to reporting and notification deadlines approaching and governments around the world making progress in establishing domestic rules and advancing legislation, providing organisations with greater clarity on how to proceed,” the report stated.
“This indicates that MNEs are recognising the complexity of the data-gathering process as they delve deeper into the requirements and the need to starting this early.”
Although there is an increase in legislative clarity in comparison to last quarter, there has been a surge in concern surrounding international collaboration.
This is due to the fact that different jurisdictions take a different interpretation to the definitions and implementation to localise the rules which complicates efforts to achieve global alignment.
Data gathering is still a concern for 87 participants; however, it has now been outranked by 93 per cent of participants concerned with adapting to changing legislation and local requirements.
According to the report, this shift highlights the growing challenges that organisations face in maintaining compliance across diverse regulatory landscapes.
Another concern made apparent in the report is current tax technology being able to handle the reporting and compliance requirements from BEPS Pillar Two.
Zero per cent of respondents expressed that they are “very confident” in their tax technology and data management systems, and only 5 per cent expressed that they are “confident”.
This highlights a significant decline since the previous quarter, as 5 per cent said they were “very confident” and 29 per cent said they were “confident”.
“This suggests that organisations are hit with the reality of the compliance, filing and reporting burden brought about by Pillar Two as they progress with planning and testing of current and potentially outdated systems,” the report said.
In a positive aspect, respondents continue to recognise the opportunities and benefits of BEPS Pillar Two tax planning across all areas of process, data, technology, improvement and risk management.
Thirty-three per cent of participants said they are considering technology solutions to help address challenges and leverage opportunities.
Wolters Kluwer said the insights from the readiness report demonstrate how organisations can tackle BEPS Pillar Two, its complexities and opportunities.
“As the effective start date for BEPS Pillar Two is now in play, it is crucial for MNEs to accelerate their preparation efforts.
“While significant challenges remain, proactive planning, strategic investments in technology and enhanced global collaboration will be key to achieving compliance.”
