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October 2023
Pillar Two
Info Sheet -
Adjustments to GloBE Income and Covered Taxes
https://www.pwc.com/us/en/services/tax/multinationals/pillar-two-model-for-data-and-reporting.html

PwC | Pillar Two Info Sheet October 2023
The GloBE rules require a Top-Up Tax on a jurisdictional basis for any
Constituent Entity (CE) which fails to meet the minimum required
effective tax rate (ETR) (i.e., 15%). Determining if a Top-Up Tax should
be applied requires two major inputs: (1) GloBE income and (2) tax
imposed on such income. Once both inputs are determined, the
aggregated jurisdictional ETR can be calculated (i.e., tax divided
by GloBE income, aggregated for each CE in the jurisdiction). If the
aggregated ETR is less than the 15% minimum rate, a Top-Up Tax will
be applied pursuant to Article 2-5 of the GloBE rules.
GloBE Income or Loss is generally calculated based on separate legal
entity financials using the Ultimate Parent Entity’s (UPE) financial
reporting standard (e.g., US GAAP), but with numerous required or
elective adjustments. For example, certain disallowed expenses are
required to be reversed, and intra-group transactions may be adjusted
to comply with the arm’s length standard. Below is an overview of the
GloBE Income (or Loss) calculation and the required adjustments to
financial statement income needed to compute such amount.
2
Background

3
Consolidated IFRS/US
GAAP or equivalent
financial statements
Deconsolidate financial
statements for each
Constituent Entity
Push down
consolidation
adjustments (excluding
Purchase Price
Adjustments)
Elect to aggregate or
consolidate on a
jurisdictional basis
Process adjustments to
calculate GloBE Income
and Covered Taxes
Calculate ETR
[Covered Tax/GloBE
Income]
If ETR is below the
minimum rate of 15%
Adjust GloBE Income
for Substance carve
outs
Calculate jurisdictional
Top-up Tax
Identify Constituent
Entities and their
locations
File GloBE return in
UPE jurisdiction (15
months after end of
period, 18 months first
year)
Monitor post submission
for timing differences
and refile
Basic Overview -
Illustrative Process for GloBE Calculation
PwPwCC || PilPillalarr TTwwoo Info Sheet October 2023






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Pillar Two Entity Classification Flowcharts
This document includes flowcharts to help provide a roadmap as to what entities
qualify as a Constituent Entity (CE) for purposes of applying the GloBE rules,
including Minority-Owned CEs, Partially-Owned CEs, and JVs. The flowcharts also
provide a roadmap to the types of Flow-Though Entities and Hybrid Entities.
pdf:Differences between the Transitional CbCR Safe Harbor and Pillar Two
pdf:Pillar Two Elections
pdf:Info Sheet - Adjustments to GloBE Income and Covered Taxes
pdf:Pillar Two Entity Classification Flowcharts