Hot Topic | February 2023

Insight

Global Minimum Tax

We address accounting questions related to the new GloBE rules.

Angie Storm

Angie Storm

Deputy Chief Accountant, Dept. of Professional Practice, KPMG US

+1 212-909-5488

Matt Drucker

Matt Drucker

Partner, Dept. of Professional Practice, KPMG US

+1 212-872-3584

Implementing the new GloBE rules and accounting for the top-up tax is proving to be a challenge and stakeholders have raised questions, including whether the top-up tax is within the scope of the income tax accounting standards under US GAAP and IFRS® Accounting Standards (ASC 740 and IAS 12, respectively) and the accounting for temporary differences.

Applicability

Multinational enterprises (MNE) with consolidated group revenue exceeding €750 million in at least two out of the last four years

Key impacts

  • The GloBE rules subject large multinational groups to at least the minimum rate of 15% of income arising in each jurisdiction in which they operate. A top-up tax would arise only if a group pays an insufficient amount of income taxes at the jurisdiction level.
  • The GloBE top-up tax is in the scope of ASC 740 and IAS 12 for US GAAP and IFRS Accounting Standards, respectively.
  • Under US GAAP, the GloBE top-up tax is accounted for as an alternative minimum tax. Companies should not record GloBE-specific deferred taxes or remeasure existing deferred taxes under local regular income tax systems to the GloBE rate. Instead, they should recognize the incremental effect of the GloBE top-up tax as incurred.
  • Under IFRS Accounting Standards, the International Accounting Standards Board proposed amendments to IAS 12, which would introduce a temporary mandatory exception from accounting for deferred tax and provide new required disclosures. 

Report contents

  • Calculating the top-up tax
  • Complexities in the accounting for the top-up tax
  • Accounting for the top-up tax

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