Working with Pillar Two Covered Tax

Covered taxes referred as taxes imposed on a in scope Entity's income or loss.

Pillar Two ETR

The Pillar Two Global ETR is determined by dividing the amount of covered taxes by the amount of income as determined under the GloBEIncome.

Pillar Two Top-up Tax

When the Entities ETR is below the Pillar Two tax rate, the Top-up tax percentage for the Entity must be calculated. This is computed by subtracting the ETR from the Pillar Two tax rate (for example, if the ETR is 10%, the Top-up Tax percentage is equal to 15% - 10% = 5%).

Top-up Tax % = Minimum Pillar Two rate - Entities ETR

The Top-up Tax percentage is then multiplied by the total income in the jurisdiction to determine the amount of Top-up Tax.

The total income for the Entity is equal to the GloBE Income less the Substance Based Income Exclusion (that is, an excluded routine return on tangible assets and payroll).

Recast Calculation

The recast leverages data for temporary difference accounts. You must do the following:

1. Add temporary differences accounts to the GAAP to Stat and Stat to Tax hierarchies.
2. Enter the Statutory tax rates to the tax rate schedule and then add current year movements to TRCS_CYADJ (The POV must be set to Entity, Domicile, Entity Currency, and Entity Input to enter data).
3. Configure Covered tax to include selected/all temporary difference accounts.

The Covered Tax schedule will determine if the current year rate is higher versus min tax rate and calculate the recast adjustment.