IASB ED on IAS 12 – Pillar Two Model Rules

The European Fund and Asset Management Association (EFAMA) has welcomed the International Accounting Standards Board’s (IASB) proposal to introduce a temporary exception from accounting for deferred taxes arising from the implementation of Pillar Two model rules, which aim to address the tax challenges arising from the digitalisation of the economy. EFAMA has also supported the Exposure Draft ED/2023/1 to ensure a global minimum level of taxation for multinational groups, provided tax neutrality in respect of investment funds is preserved. The majority of investment funds are not required to consolidate, and the rules drafted by the OECD establish that investment funds and investment entities should be carved out/excluded from Pillar Two. However, some concerns and challenges may arise where a fund is held and consolidated under the accounts of an MNE Group in the scope of Pillar Two. EFAMA is still monitoring the impact of the Pillar Two rules on its members‘ structures.
EFAMA mainly agrees the comments made by ESMA (eventid=19898), but thinks that additional disclosures should be subject to normal materiality considerations, as the incremental Pillar 2 tax payable will not be material and it would be disproportionate to require specific disclosures on each jurisdiction where any top-up tax is likely to be immaterial.