Pillar II: Regulation with additional clarifications on CbCR Safe Harbors released

The foundation for applying the transitional CbCR Safe Harbor in the context of the Global Minimum Taxation is a qualified country-by-country report (CbCR). A CbCR is deemed qualified only if it is prepared based on a qualified data basis. The regulation issued by the Federal Minister of Finance on December 5, 2024, provides further clarifications on the necessary prerequisites.

The Austrian minimum tax act applies to MNE groups with consolidated revenues exceeding EUR 750 million in at least two of the four preceding fiscal years. The transitional safe harbor offers a significant simplification for affected companies by employing simplified jurisdictional revenue as well as income and tax information. To apply the transitional safe harbor, the primary data for the simplified computation must be sourced from a qualified CbCR.

Data Basis

The qualification of the CbCR for the Safe Harbor largely depends on the data basis used. According to the regulation, the following data sources are available:

1. The reporting package prepared for the consolidated financial statements.
2. The individual financial statements of the respective constituent entity, provided they are prepared using an acceptable or authorized financial accounting standard.
3. For immaterial constituent entities, the use of an acceptable or authorized accounting standard is not required. Consequently, the stand-alone financial statement of the constituent entity used for CbCR reporting purposes can be utilized.
4. If a permanent establishment does not prepare financial statements, the computations and documents prepared for the allocation of results between the head office and the permanent establishment can be considered as the data basis.

Consistent use of data

Merely using a qualified data basis is insufficient for the CbCR to be considered qualified. The regulation also requires that the data for each constituent entity and all entities within a jurisdiction is derived from the same qualified data source. Exceptions exist for immaterial constituent entities and permanent establishments that do not prepare financial statements. Once chosen, the data basis must be consistently used in subsequent years when applying the CbCR Safe Harbor.

Special regulations apply to reporting packages and individual financial statements that include effects from purchase price accounting. Furthermore, the regulation comprehensively specifies details of adjustments in the calculation of the CbCR Safe Harbours that need to be made in the presence of hybrid arrangements.

Conclusion

A MNE group will only qualify for the transitional CbCR Safe Harbor regarding its Austrian constituent entities if a qualified CbCR is available. A detailed review of this requirement, considering the guidelines of the newly published regulation, is crucial to avoid a complex Pillar II computation based on the general Pillar II rules during the initial years of application. Our Pillar II team is available to assist you with related questions.