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Understand the implications and prepare for regulatory alignment.
The OECD Pillar Two framework introduces a global minimum corporate tax rate of 15%, affecting multinational enterprises (MNEs) operating across borders. While Pakistan has not yet adopted this framework, the Federal Board of Revenue (FBR) and the Ministry of Finance are actively evaluating its implications. With regulatory alignment expected in the near future, now is the time to begin preparations.
What is the OECD Pillar Two framework?
The OECD Pillar Two framework aims to combat base erosion and profit shifting by introducing a standardised global minimum corporate tax rate of 15%. This initiative ensures that multinational enterprises (MNEs) contribute a fair share of tax in each jurisdiction where they operate.
Beyond addressing disparities, the framework brings increased tax complexity, making compliance a critical responsibility for businesses. Understanding how these rules apply can help organisations mitigate risks and unlock opportunities.
Implementation status in Pakistan
The Federal Board of Revenue (FBR) and the Ministry of Finance are currently reviewing the OECD Pillar Two framework. Although there is no definitive implementation date, regulatory compliance is anticipated as Pakistan aligns itself with global tax standards.
Staying informed about developments is essential to ensure your organisation is prepared for forthcoming changes.
How will Pillar Two impact middle market businesses in Pakistan?
The OECD Pillar Two framework affects entities such as:
. Multinational groups operating in Pakistan with parent entities based abroad.
. Multinational groups with subsidiaries outside Pakistan.
. Large domestic groups operating exclusively within Pakistan.
Essentially, any business with cross-border operations or domestic groups subject to size-related exemptions should evaluate their exposure to the framework’s requirements.
Actions to take now
Preparation is key to mitigating risk and maximising opportunities under the OECD Pillar Two framework. Take proactive steps today by following these key actions:
1. Assess your exposure
Identify whether your organisation is likely to fall within the scope of the framework.
2. Strengthen your systems
Update your financial reporting processes to meet the framework’s robust compliance standards.
3. Engage expert advisers
Work with experienced tax advisers who can guide your business towards efficient and effective compliance.
4. Stay up to date
Monitor updates from the FBR and international bodies for timely information on regulatory changes.
Take charge of regulatory change
Navigating the complexities of the OECD Pillar Two framework can seem daunting, but you do not have to face it alone. Our team of tax professionals is here to simplify the process and empower your organisation to adapt seamlessly.
. Receive tailored advice to understand your exposure.
. Build robust compliance systems to meet global standards.
. Develop strategies to optimise your tax outcomes.
Stay ahead of change. Contact us today for a consultation.
Connect with RSM to get personalized advice and solutions tailored to your needs. Let us help you take the next step with confidence.
