Corporate taxes represent a significant source of revenue for most global governments, and they’re subject to constantly evolving regulatory requirements. Even though multinational enterprises (MNE) strive to comply with existing jurisdictional tax regulations, they use tax planning and optimization activities to minimize their tax liabilities. As the global economy becomes more digital, the tax environment becomes even more complicated.

The Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on BEPS refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. More than 135 countries and jurisdictions are implementing 15 measures to prevent tax avoidance, to cohere tax rules, and to ensure transparency.

As of 4 November 2021, a two-pillar plan was adopted to reform international taxation rules and to ensure multinational enterprises pay a fair share of taxes wherever they operate:

• Pillar One reallocates profits and related taxing rights from certain jurisdictions where MNEs have a physical presence to other jurisdictions where MNEs have a market presence. It applies to MNEs with global turnover in excess of €20 billion and profitability in excess of 10 percent.

• Pillar Two introduces Model Global Anti-Base Erosion (GLoBE) rules to implement a Global Minimum Tax of 15 percent in each jurisdiction in which an MNE operates. The minimum tax rate in will only apply to MNEs with consolidated annual revenue of more than €750 million.

Both pillars do not need to be implemented concurrently. In fact, Pillar One is not a pre-requisite for implementing Pillar Two.

Our Approach

SAP Profitability and Performance Management (SAP PaPM), developed by SAP and msg global solutions, helps companies implement the BEPS 2.0 methodology. With SAP PaPM, we help our customers create and maintain transparency based on simplicity and certainty. The first version of our sample content was released in June as part of SP18, focusing on Pillar Two of the BEPS 2.0 framework, planned to be released in the next month. Pillar One will be added to the sample content in one of the next releases.

SAP PaPM helps customers comply with BEPS 2.0 regulations, provides the tax regulations in the BEPS 2.0 framework, and contains reports for comprehensive analysis. SAP PaPM OECD BEPS 2.0 Tax Calculation and Reporting helps companies:

• Achieve tax certainty for taxpayers and tax administrations
• Enhance a reliable framework for cross-border investment
• Have real-time data available for taxpayers and tax administrations, resulting in more timely access to tax-relevant information held abroad
• Reduce the compliance burden on taxpayers with standardized information reporting and single filing, letting them compile and submit the data once and keeping accessible to all the relevant tax administrations
• Produce financial data outcomes to map the impact on effective tax rate and cash taxes under various scenarios
• Analyze and evaluate better risk assessment and management
• Eliminate duplicate rules or filing requirements
• Create detailed quantitative analysis and summary reports with flexible visualizations to significantly reduce the compliance burden
• Use powerful What-If simulation capabilities to rapidly simulate the impact of adjustments in the Top-up tax amount
• Elect and restrict the election for a specific tenure, as defined under the OECD timelines.

The OECD might issue an updated timeline for implementation of the BEPS 2.0 tax rules by customers. Accordingly, we will continue updating SAP PaPM for BEPS 2.0 with the latest updates as they are published.

Stay tuned.