IAS 12 and Pillar Two tax rules

IAS 12 and Pillar Two tax rules

As countries or jurisdictions start to enact laws to implement the OECD’s Pillar Two rules, entities in low tax jurisdictions, that are part of large multinational groups with consolidated revenue exceeding €750 million, will be subject to higher tax rates in future (top up tax). Higher tax rates could impact the measurement of deferred tax assets and liabilities because IAS 12 Income Taxes requires an entity to measure these using tax rates that have been enacted or substantively enacted at the end of the reporting period.

However, because of uncertainties as to how the top up tax will affect deferred tax calculations, the IASB has published an Exposure Draft IASB ED/2023/1 which proposes to amend IAS 12 Income Taxes to provide a mandatory temporary exemption from accounting for deferred taxes arising from any top up tax required under the Pillar Two rules.

The Exposure Draft also proposes additional disclosure requirements for affected companies.

You can read a summary of the Exposure Draft proposals in BDO’s International Financial Reporting Bulletin (IFRB 2023/02).

Need assistance?

Please contact our Corporate & International Tax Management team if you require assistance implementing the Pillar Two rules, or our  IFRS Advisory team  for the financial reporting implications of the new rules.


For more on the above, please contact your local BDO representative.

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