Classifying Pillar Two

Tax Reporting now has an enhanced capability to classify the Pillar Two entities into different categories (or classes). Entities can be categorized into the following types:

  • Constituent Entity  
  • Flow-Through Entity – Tax Transparent
  • Flow-Through Entity – Reverse Hybrid
  • Hybrid Entity
  • Permanent Establishment
  • Stateless Constituent Entity
  • Low Taxed Constituent Entity
  • Main Entity  
  • Minority-Owned Parent Entity
  • Minority-Owned Subsidiary  
  • Minority-Owned Constituent Entity
  • Investment Entity  
  • Insurance Investment Entity  
  • Joint Venture (JV)
  • JV Subsidiary
  • Non-Material Constituent Entity
  • POPE (Partially Owned Parent Entity)
  • Ultimate Parent Entity
  • Intermediate Parent Entity
  • Non-Group member
  • Excluded Entity -  You can provide one of the below reasons for exclusion:
    • Governmental Entity  
    • International Organisation  
    • Non-profit Organisation  
    • Pension Fund  
    • Investment Fund that is an UPE  
    • Real Estate Investment Vehicle that is an UPE  
    • Entity owned by Excluded Entities under Article 1.5.2 (a)  
    • Entity owned by Excluded Entities under Article 1.5.2 (b)

Business Benefit: This new capability is in compliance with the OECD Global Minimum Tax rules and reporting requirements. The classification will have relevant impact on the calculation of minimum tax under the rules.

Steps to Enable

To enable this feature while creating a new application, navigate to Create Application: Features, select Entity Classification under Pillar Two (Global and Local Top-up Tax), and click Enable.

If the application is already created, you can enable this feature by navigating to Application>Configurations. On the Configure screen, under Pillar Two (Global and Local Top-up Tax), select Entity Classification and click Enable. This creates the Pillar Two Entity Classification form and the related metadata.

Note: As this feature relies on the Pillar Two Jurisdiction Automation form, you must ensure that this form is not customized before enabling the feature.

Key Resources