Preparing your group’s first Pillar Two information request

Pillar Two draws on information that is usually held by different people: the legal entity register, the consolidation system, local tax computations, incentive documentation, payroll and fixed asset records. None of it is unusual. What is unusual is needing it in one place, on the same basis, for every jurisdiction at once.

Groups that treat the first request as a one-off data pull generally repeat it. Groups that treat it as building a reusable jurisdictional data set generally do it once and then maintain it.

Begin with an ownership chart that identifies the ultimate parent, every intermediate parent, each entity’s jurisdiction and the ownership percentages between them, together with permanent establishments and any entity treated as transparent.

Alongside it, record how each entity is treated in the consolidated accounts, and note any entity excluded only because of size, materiality or held-for-sale treatment. This is also where candidates for excluded-entity treatment, joint ventures and investment entities are flagged for separate analysis rather than assumed.

The scope test generally looks at consolidated revenue of at least EUR 750 million in at least two of the four fiscal years preceding the year being tested, subject to special rules. That means collecting a four-year revenue history for each period under review, from the ultimate parent’s consolidated financial statements.

Where the group has restructured, merged or demerged during that window, the history needs to be assembled with care rather than taken from the latest report alone.

For each jurisdiction, the core set is: accounts for the group’s entities on the consolidation basis, current and deferred tax, the incentives and credits those entities hold, and losses carried forward. Country-by-country report data and the financial records supporting it belong here too, because the transitional safe harbour tests are run on qualifying report data rather than on figures prepared specially.

Two further items are easy to overlook and often valuable: eligible payroll costs and the carrying value of tangible assets by jurisdiction, which drive the substance-based income exclusion, and the paperwork behind every incentive, which is what a later review will ask to see.

Registration, notification, returns and payment sit on different timetables in different jurisdictions, and an entity that owes no top-up tax can still owe a filing. Record, for each jurisdiction, which entity is responsible, what has to be filed, when, and which elections have been made.

Elections deserve their own register. Several are made for a period or for a number of years, several bind the group across jurisdictions, and all of them need to be supportable later.