Pillar Two differentiates between Constituent entities and excluded entities. The Constituent Entities of a multinational Group, include all the entities within the Group. Under Pillar Two permanent establishments are treated as separate Constituent Entities. The consolidated turnover of 750 million, consists of all constituent entities, so including permanent establishments, of a multinational group.
Excluded Entities are not subject to the provisions of Pillar Two, meaning that they in principle will be excluded from the global minimum tax of 15%. However, their revenue is still taken into account for purposes of the consolidated revenue test.
Excluded Entities are Governmental Entities, International Organisations, Non-profit Organisations, and Pension Funds as well as any Investment Fund or Real Estate Investment Vehicle that is the ultimate parent entity of a multinational Group.
The definition of Excluded Entities is also extended to cover some entities that are owned at a minimum of 95% by excluded entities and that hold assets or investment funds and those who only carry out ancillary activities for excluded entities.
Furthermore, entities that are owned for at a minimum of 85% by excluded entities and substantially derive all their income from dividends or capital gains from excluded entities, are excluded as well.
So, there are quite some exemptions of Pillar Two. In the next video, we will zoom in on safe harbors. For now: If you have any questions, please contact me or one of my colleagues.
