Pillar 2 Algorithm: Difference between revisions

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The algorithm will present the following features:
The algorithm will present the following features:


* Scope and Groupe perimeter analysis
* Scope and Groupe perimeter analysis, to determine the different sub-groups in each jurisdictions for the safe-harbour rules, elections and ETR computations,
* Safe Harbour computation and analysis
* Safe Harbour computation and analysis, to identify the sub-perimeters requiring less detailed data collection and resulting in simpler computations,
* GloBE Income and Adjusted covered tax computation
* GloBE Income and Adjusted covered tax computation
* Election treatments
* Election treatments
* Effective Tax Rate and Top-Up Tax computation
* Post-filing and additional Top-Up Tax computation
* Aggregated tax impact on each [[tax payer]] including different features of [[tax systems]] ([[losses carry forward]], tax credits on [[WHT]]...)
* Effective Tax Rate and Top-Up Tax computation for LTCE's
* Charging provisions and Paying entity identifications (UPE, POPEs, IPEs)
* UTPR computation


=== General logic of the algorithm ===
=== General logic of the algorithm ===
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|-
|-
|Matching
|Matching
|ATP Declaring Entity segmentation
|
|Allows to define the segmentation of the data input that corresponds to the base aggregation level for the Transfer Pricing Computation (PLIs will be aggregated at this level of segmentation)
|
|Couple (String; Integer)
|
|Several Values can be defined as "ATP Declaring Entity segmentation", but the Integer has to be unique among the set
|
|Yes
|
|-
|-
|Matching
|Matching
|ATP Tax Payer
|
|Allows to define the segmentation of the data input that corresponds to the aggregation level for the Tax computation, it is necessarily a subset of the ATP Declaring Entity segmentation defined
|
|Boolean
|
|Completes the definition of the ATP Declaring Entity segmentation with a boolean (String; Integer; Boolean)
|
|No, if absent no tax computation are performed
|
|-
|-
|Matching
|Matching
|ATP Counterpart Entity segmenfation
|
|Allows to define the segmentation of the data input that corresponds to the base aggregation level for the Transfer Pricing Computation (PLIs will be aggregated at this level of segmentation), if it is not defined or null for certain data entries the Counterpart entities will be sourced from the associated Rules
|
|Couple (String; Integer)
|
|Several Values can be defined as "ATP Counterpart Entity segmentation", but the Integer has to be unique among the set
|
|No, if absent the Counterpart entity may be automatically defined using the Rules file
|
|}
|}


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|-
|-
|Matching
|Matching
|ATP Rule segmentation
|
|Allows to define the segmentation level of the Rule component to be retrieved
|
|Couple (String; Integer)
|
|Several Values can be defined as "ATP Rule segmentation", but the Integer has to be unique among the set
|
|Yes
|
|-
|-
|Matching
|Matching
|ATP Counterpart Entity segmentation
|
|Allows to define the segmentation that defines the Counterpart Entity, it is recommended to use the same definition as the Declaring Entity segmentation to allow for smooth computations for the counterpart entities and their tax impacts
|
|Couple (String; Integer)
|
|Several Values can be defined as "ATP Counterpart entity segmentation", but the Integer has to be unique among the set
|
|No, if absent from the data as well, no TP computations are possible
|
|}
|}


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The selected structured files must form a sequence where their temporal referencing perimeters follow each other in a disjointed and adjacent manner (e.g., a succession of months, quarters, years).
The selected structured files must form a sequence where their temporal referencing perimeters follow each other in a disjointed and adjacent manner (e.g., a succession of months, quarters, years).


===== Impact of series on Financial data =====
===== Impact of series on Post-filing computations =====
Initially, these relative temporal reference values are sought within the same structured file, and then in the preceding structured file that corresponds to the correct relative reference in the matching file within the sequence.
The Pillar 2 computations allows and sometimes requires to perform the recalculation of the Top-Up Tax liability of the previous fiscal years to generate the Additional Top-Up Tax. This will only be possible under the following conditions.


Only one single value works this way for TP computation : ATP Tax losses carry-forward N-1.
# Structured files exists for the fiscal years prior to the one under computation. They must be present in an interrupted sequence of 5 fiscal years starting with N-5.
# Input data leading to the application of the recalculation are present,


===== Impact of rules =====
===== Impact on rules =====
The optimization calculation will be further impacted as transfer pricing rules can cover a reference period exceeding a single structured file. The optimization calculation will then treat the rule file variable as a shared variable.


=== Computational steps ===
=== Computational steps ===
Data received by the algorithm are processed using the standardized [[Rule matching methodology]]. At this stage every single entry contains both the financial data and the rules to be applied for both Transfer Pricing Computation and Tax impact computation.

Revision as of 06:01, 11 October 2023

Introduction

Context

Welcome to the OpenSource Pillar 2 Algorithm wiki page! This platform serves as a comprehensive resource for understanding and implementing a pioneering open-source algorithm specifically designed to perform Pillar 2 computations and prepare the GloBE Information Return.

BEPS Pillar 2 represents a significant step in global tax reform, introducing the concept of a Global Minimum Tax to prevent aggressive tax planning and profit shifting by multinational enterprises. Given the intricate nature of international taxation, coupled with the unique structures of individual corporations, computing the tax liabilities under the Global Minimum Tax framework is inherently complex. The scope of the regulation and the various election options available to entities further complicate the computations, requiring in-depth analysis and consideration.

Objectives

Recognizing this complexity, Algonomia has developed a sophisticated algorithm to address these challenges. By opting to release it as open-source, Algonomia aims to foster collaboration among tax specialists, economists, and administrations. This approach not only ensures the refinement and enhancement of the algorithm but also promotes transparency, demonstrating a commitment to a fair and unified international tax landscape.

Feature Overview

The algorithm will present the following features:

  • Scope and Groupe perimeter analysis, to determine the different sub-groups in each jurisdictions for the safe-harbour rules, elections and ETR computations,
  • Safe Harbour computation and analysis, to identify the sub-perimeters requiring less detailed data collection and resulting in simpler computations,
  • GloBE Income and Adjusted covered tax computation
  • Election treatments
  • Post-filing and additional Top-Up Tax computation
  • Effective Tax Rate and Top-Up Tax computation for LTCE's
  • Charging provisions and Paying entity identifications (UPE, POPEs, IPEs)
  • UTPR computation

General logic of the algorithm

Data structure

Structure overview

Algonomia API Framework

The Transfer Pricing Algorithm uses Algonomia API Framework to receive input data and send output data for the computations. In the following sections, it is assumed that data has been transferred to the Transfer Pricing Algorithm using this framework.

Input

The input data follows the usual division required by the Algonomia API Framework : Data, Rules, Other.

Data

The following tables presents the data points allowed as "Data" :

Input Data Points
Role Label Definition Typing Multiplicity behavior Mandatory
Matching
Matching
Matching
Rules

The following tables presents the data points allowed as "Rules" :

Input Rules data points
Role Label Definition Typing Multiplicity behavior Mandatory
Matching
Matching
Other

Output

Serie of files

A series of structured files corresponds to the selection of a sequence of structured files whose data and rules can be processed in a coordinated manner in the dashboard or the calculations of the algorithm.

The selected structured files must form a sequence where their temporal referencing perimeters follow each other in a disjointed and adjacent manner (e.g., a succession of months, quarters, years).

Impact of series on Post-filing computations

The Pillar 2 computations allows and sometimes requires to perform the recalculation of the Top-Up Tax liability of the previous fiscal years to generate the Additional Top-Up Tax. This will only be possible under the following conditions.

  1. Structured files exists for the fiscal years prior to the one under computation. They must be present in an interrupted sequence of 5 fiscal years starting with N-5.
  2. Input data leading to the application of the recalculation are present,
Impact on rules

Computational steps

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