OECD issues a new package of Administrative Guidance on Global Anti-Base Erosion Model Rules (Pillar 2)


On 18 December 2023, the OECD released the third package of Administrative Guidance. This third package follows the Administrative Guidance released in February and July. This guidance provides welcome clarification to the Pillar 2 rules, which will in many territories, including Belgium, come into force as from financial year 2024, The document addresses issues and frequently asked questions related to the Transitional Safe Harbours and the application of the GloBE Rules in general. This guidance will be incorporated into a revised version of the Commentary that will be released next year and will replace the original version of the Commentary issued in March 2022. 

Summary of key issues addressed in the Administrative Guidance;

  • Purchase Price Accounting (PPA) Adjustments: Under certain conditions, a PPA adjustment included in the Constituent Entity’s financial accounts should not be eliminated for purposes of the Transitional Safe Harbour. This is important because it can reduce the administrative burden for companies that wish to apply the Transitional Safe Harbour relief.
  • Consistent use of data per jurisdiction in view of a ‘qualifying CBCR’: MNE Groups that fail to use data from the same source for all Entities in the same jurisdiction (i.e. the accounts used to prepare the consolidated financial statements of the Ultimate Parent Company or separate financial statements of each Constituent entity) will be disqualified from applying the Transitional Safe Harbour for that jurisdiction. Exceptions are foreseen for Non-Material Constituent Entities and Permanent Establishments as well as when deferred tax expenses are only reflected in the accounting entries that are held at the level of the consolidating Parent Entity.
  • Permanent establishments: The guidance clarifies how Permanent Establishments can comply with the Pillar 2 rules, even in cases where there is no requirement to produce separate Financial Statements for the Permanent Establishment. In case Qualified Financial Statements are not available for a Permanent Establishment, the group may apply the Transitional Safe Harbours based on other financial reporting prepared by the entity, such as management accounts. 
  • Adjustments to Qualified Financial Statements: MNE Groups that make adjustments to the data drawn from Qualified Financial Statements that are not explicitly required in the Commentary or under Agreed Administrative Guidance would disqualify a jurisdiction from the Transitional Safe Harbour, regardless of whether such adjustments were intended to align with the GloBE Rules. 
  • Simplified Covered taxes: the reference to the Income Tax Accrued (Current Year) is removed from the guidance, suggesting that only the option to calculate the Simplified Covered Taxes (i.e. sum of current and deferred tax expense) based on the Qualified Financial Statements of the Constituent Entities would remain. This is potentially a very important change to the commentary for many taxpayers.
  • Details to the permanent Simplified Calculation Safe Harbour for Non-Material Constituent Entities (NMCE) provides a framework for simplified calculations (in line with what was already included in the document on Safe Harbours and Penalty Relief). If at least one of the three tests is met (De-minimis test, ETR test and Routine-Profits test), the top-up tax is deemed to be zero and no detailed GloBE calculations should be made. Note that the NMCE Simplified Calculations could be combined with the GloBE calculations of other Constituent Entities in the same Jurisdiction for the purposes of determining whether a Tested Jurisdiction meets the requirements of the Simplified Calculations Safe Harbour.

Further, the Administrative Guidance also addresses issues related to Blended CFC Taxes (GILTI), mismatches between Fiscal Years and Tax Year and Filing deadlines for MNE Groups with Short Reporting Fiscal years. 

For more insights on the impact of the Administrative Guidance, or details on what to disclose in your 2023 accounts, please do not hesitate to reach out to your regular PwC contact, or contact Pieter Deré, Evi Geerts or Carla Buyens.