Navigating Corporate Tax Planning in the UAE: Strategies for 2023
As globalization intensifies, so does the complexity of international taxation rules. The Organization for Economic Co-operation and Development (OECD) is at the forefront of addressing these complexities, especially with the implementation of the two-pillar approach. In this article, we will delve deeply into the OECD’s Pillar Two framework and demonstrate why AKW Consultants is best suited to help businesses navigate this complex landscape.
What is the second OECD pillar?
The OECD’s Pillar Two proposal, also referred to as the “Global Anti-Base Erosion” (GloBE) proposal, seeks to ensure that multinational enterprises (MNEs) pay a minimal level of tax, regardless of where they are headquartered or in which jurisdictions they operate. This approach combats profit-shifting strategies that enable multinational corporations to exploit gaps and mismatches between different countries’ tax systems.
Key Income Inclusion Rule (IIR) Components of the Second Pillar This rule ensures that if a multinational’s income is taxed at a rate below a predetermined minimum rate in a particular country, the parent company’s country will impose an additional tax to meet the minimum rate.
The Undertaxed Payments Rule (UTPR) seeks to deny deductions or impose source-based taxation on payments between entities of the same multinational group if those payments are not subject to the minimal tax rate.
Subject to Tax Rule (STTR): This assures that payments between entities are subject to at least the minimum tax rate in the country of the recipient.
Simplicity and Coordination: Recognizing the challenges posed by the new rules, the OECD focuses on making the rules as simple as feasible and ensuring jurisdictional coordination to prevent double taxation.
The Significance of the Second Pillar for Companies
Prevention of Profit Shifting: With the implementation of Pillar Two, multinational enterprises are discouraged from engaging in profit-shifting activities that take advantage of disparities between tax regimes.
By establishing a minimal tax rate, the OECD intends to create a more level playing field by making it more difficult for certain jurisdictions to offer artificially low tax rates as an inducement for MNEs.
Enhanced Transparency: Multinational enterprises (MNEs) will be required to disclose more detailed financial information, promoting transparency and diminishing aggressive tax planning opportunities.
Why Should You Rely on AKW Consultants for OECD Pillar Two Tax Advisory Services?
The OECD Pillar 2 model regulations mandate that multinational enterprises within their scope pay a minimum level of tax on income generated in the jurisdictions in which they operate. Designed to accommodate disparate international tax systems, tax consolidation rules, income allocations, entity classification rules, and business structures, these rules are expansive in scope and reach. They are anticipated to have a significant effect on tax operations for in-scope groups with multinational activity.
This magnitude of tax reform affects many aspects of how global businesses are taxed, as well as their data needs, calculation requirements, and reporting requirements. In response, multinationals that qualify must work to comprehend the new regulations and model the global financial, operational, and strategic effects. To meet the data and reporting requirements of Pillar Two, businesses must coordinate their tax, finance, IT, and legal inputs end-to-end. This involves having access to the appropriate data at the appropriate level of detail, evaluating existing technology, generating calculations, preparing and training resources, and managing the expectations of stakeholders.
Global Tax Experts at AKW Consultants can assist you in assessing the impact of Pillar 2 on your current and future business plans by providing targeted technical support, global impact analysis, and compliance oversight. We can assist you in identifying and evaluating the impact of this new and intricate legislation in multiple countries.
Specific reasons why AKW Consultants would be the right partner for you are:
Expertise in International Taxation: AKW Consultants has a team of tax experts who are well-versed in international tax regulations, making it simpler for businesses to navigate the complex waters of the OECD’s Pillar Two framework.
Personalised Approach: AKW Consultants recognises that every business is unique and therefore offers individualised services. Consequently, they provide customised solutions, assuring compliance and optimising tax strategies.
Updates Frequent: The tax landscape is in constant flux. AKW Consultants ensures that clients are informed of the most recent developments, enabling businesses to stay ahead of the competition.
Ethical Approach: AKW Consultants focuses on providing ethical tax planning services. They assist businesses in fulfilling their tax responsibilities while ensuring that they do not engage in aggressive tax avoidance strategies.
Pillar Two Tax Advisory services from AKW combine the in-depth knowledge of AKW tax practitioners with the analytical power of data and technology solutions to assist corporations in assessing and evaluating the tax implications of Pillar Two. From the initial gap assessment to the tax impact analysis to the filing of the Pillar Two return, we offer assistance to help you face the challenge.
Beyond Pillar Two, AKW offers comprehensive tax advisory services, tax technology implementation, financial system enhancement & Global compliance ensuring that businesses are well-equipped to handle all of their taxation requirements.
The introduction of the OECD’s Pillar Two framework has exacerbated the difficulty of navigating the complex international tax regulations. By partnering with AKW Consultants, businesses can ensure they are not only compliant but also making the most of the opportunities this new landscape provides. In a world where transparency, fairness, and ethics are paramount, AKW Consultants stands out as the ideal partner for all of your OECD Pillar Two Tax Advisory requirements.