Getting and staying ahead as BEPS 2.0 Pillar Two developments unfold

A phased approach is helping a global company prepare for impending changes.

A global apparel company worked with EY tax professionals to develop its approach to meet the new Pillar Two global minimum tax requirements. Having provided tax services to the company over several years, the EY team leveraged its deep understanding of the company’s facts to identify potential Pillar Two impacts and determine how to help manage those impacts. With Pillar Two developments still unfolding, quantifying the possible impacts and then analyzing and preparing appropriately was complex.

▉ The issue

Along with the apparel company’s supply chain came the potential for significant Pillar Two exposure. The company was also undergoing an important period of change from a business perspective, including transitioning to a “sourcing” model and implementing SAP S/4HANA.

▉ The EY approach

Knowing the significant amount of work that would be required to respond to Pillar Two requirements, the EY team recommended a phased approach that started with an impact assessment, modeling and development of business planning responses.

In addition, as BEPS 2.0 Pillar Two activity ramped up, the EY team established a recurring cadence of training sessions with the client (and EY team) on the operation of the rules. These efforts included a workshop and recurring touch points to walk through the different elements of the Pillar Two measures.

▉ The outcome

The client — well informed as to the challenges of responding to Pillar Two developments — agreed with the phased approach the EY team proposed. The client has already briefed the board and executive management on the potential impacts and the company’s proposed responses.

The EY professionals’ understanding of both the apparel company and BEPS 2.0 Pillar Two helped the team uncover some important observations, including locations where there might be unexpected material Pillar Two impacts. These analyses highlighted important actions that the company could then prioritize.

The EY engagement team also included EY Tax Technology and Transformation (TTT) professionals on the project so they could advise the company as it implemented SAP S/4HANA. Because of this, the TTT team could help the apparel company readily access the data needed for BEPS purposes.

While many business leaders may be struggling to understand Pillar Two and how it may potentially impact their organizations, the EY team has equipped the clothing company’s tax leadership with a proactive approach and the knowledge they need to pursue additional funding to support their business planning efforts.