- Raz Shany, CPA (Isr.)
SAP PaPM for OECD BEPS 2.0 has you covered for the new global tax rules of 2024
In this post we would like to discuss the how SAP provide a solution for Base Erosion and Profit Shifting Protocol (BEPS) using SAP Profitability and Performance Management (PaPM).
What is BEPS?
Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax.
Base Erosion = use deductible payments such as interest & royalties to reduce the amount of profits in the place where the income was earned.
Profit Shifting = moving the profit from one country to another through intra-group transactions.
The result is that the profit is “stateless” and is not recognized in any country.
Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately. BEPS practices cost countries 100-240 billion USD in lost revenue annually.
for more information : https://www.oecd.org/tax/beps/about/
What is BEPS 2.0?
In January 2019 the OECD released a policy note proposing the new two-pillar approach to supersede the previously defined OECD action plan for BEPS. This policy note introduced the new BEPS framework, also known as the “BEPS 2.0” project, which comprises the following two pillars:
Pillar One relates to profit allocation rules - it intends to reallocate profits and related taxing rights from certain jurisdictions where MNEs have physical substance to other jurisdictions where MNEs have a market presence. It is commonly referred to as a significant reallocation of profits to market countries for the world’s “largest and most profitable companies”. Pillar One will apply to MNEs with a global turnover in excess of €20 billion and profitability in excess of 10%.
Pillar Two relates to new global minimum tax rules - it introduces the Model Global Anti-Base Erosion (GLoBE) rules, that propose to implement a Global Minimum Tax of 15% in each jurisdiction where a MNE operates. The minimum tax rate in Pillar Two will only apply to MNEs with a consolidated annual revenue of more than €750 million. It is an international coordinated system of taxation intended to ensure large multinational enterprise (MNE) groups to pay a minimum level of tax on the income arising in each of the jurisdictions, where they operate.
Ideal scenario is to implement Pillar 1 and Pillar 2 concurrently, but Pillar 1 is not a pre-requisite for Pillar 2 implementation. Right now, everyone is eyeing on Pillar 2 as it covers a larger target audience.
SAP's SAP Profitability and Performance Management for OECD BEPS 2.0 has you covered for the new global tax rules of 2024
Detailed quantitative analysis and summary reports reduces compliance burden ensuring regulatory requirements are met.
Provide What-if Simulation feature to analyze and evaluate impact of substance-based income exclusion in the Top-up Tax, resulting in better risk assessment and management.
Efficient data gathering (from heterogeneous sources) help organizations understand, evaluate, and communicate timely response to BEPS 2.0.
It supports Country-by-Country Reporting (CbCR) that enables a standardized system of reporting, on tax jurisdiction by-jurisdiction basis.
Electing and restricting the election for a specific tenure, as defined under the OECD timelines.
SAP Profitability and Performance Management Cloud
A digital performance management solution that maintains and executes complex calculations, rules and simulations. Built on SAP HANA Cloud, it provides breakthrough real-time business data aggregation capabilities, a high-speed calculation and processing engine, and comprehensive simulation and scenario management.
Useful SAP links regarding SAP PAPM & BEPS 2.0:
For more information, you are welcome to contact us by sending an email to info@allegropro.co.il
