Background

In March 2022, the OECD released technical guidance on its 15% global minimum tax agreed upon as the second ‘pillar’ of a project to address the tax challenges arising from the digitalisation of the economy. This guidance elaborates on the application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed upon and released in December 2021 which lay out a co-ordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

Proposal for Czech implementation of the EU Council Directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups is available on the Information System Portal of the Government of the Czech Republic.

Due to the fact that jurisdictions will implement the OECD rules at different speeds and different points in time, the IASB has decided to develop a mandatory exemption until the global tax system has settled and reestablished itself and the IASB can thoroughly assess the situation and provide a reliable solution.

The amendments to IAS 12 Income taxes

The IASB amends the scope of IAS 12 to clarify that the Standard applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the OECD.

The amendments introduce a temporary exception to the accounting requirements for deferred taxes in IAS 12, so that an entity would neither recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.

Applying the amendments, an entity is required to disclose that it has applied the exception. An entity also discloses separately its current tax expense (income) related to Pillar Two income taxes.

In periods in which Pillar Two legislation is enacted or substantively enacted but not yet in effect, an entity is required to disclose known or reasonably estimable information that helps users of financial statements understand the entity’s exposure to Pillar Two income taxes arising from that legislation.

To meet this disclosure objective, an entity is required to disclose qualitative and quantitative information about its exposure to Pillar Two income taxes at the end of the reporting period. That information does not need to reflect all the specific requirements of the legislation and could be provided in the form of an indicative range. To the extent information is not known or reasonably estimable, an entity should instead disclose a statement to that effect and information about its progress in assessing its exposure.

Effective date and transition

The amendments require that an entity applies the exception—and the requirement to disclose that it has applied the exception— immediately upon issuance of the amendments and retrospectively in accordance with IAS 8. Please note that in the EU these amendments can be applied only after their endorsement by the European Commission.

The remaining disclosure requirements are effective for annual reporting periods beginning on or after 1 January 2023.

Sources: www.iasplus.com, iGAAP in Focus — Financial reporting — IASB amends IAS 12 to introduce a temporary exception from accounting for deferred taxes arising from OECD Pillar Two model rules