The Financial Reporting Technical Committee of Chartered Accountants Ireland has responded to The Financial Reporting Council’s recent exposure draft ‘FRED 83’. The amendments proposed in this exposure draft address how deferred tax should be accounted for where a company is subject to the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two Model Rules.
In December 2021, the OECD published its Pillar Two model rules. The rules are part of a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The Pillar Two model rules:
- aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate; and
- would achieve that aim by applying a system of top-up taxes that results in the total amount of taxes payable on excess profit in each jurisdiction representing at least the minimum rate of 15%.
The proposals by the FRC introduce temporary exceptions to the accounting for deferred taxes arising from these rules, along with targeted disclosure. These rules will impact only a small number of companies as the Pillar Two rules are intended to apply to multinational groups with consolidated revenue over €750 million, subject to certain exclusions.