Which entities are exempt from Pillar 2 regulations?

Exempt entities specified in the draft Act on global minimum level of taxation

Additionally, the draft Act on top-up tax lists the entities that will not be subject to Pillar 2 regulations, eg due to the special objective of their operation or their status. These exemptions cover all three types of the new tax, i.e. global top-up tax, domestic top-up tax as well as top-up tax on undertaxed profit. The list of exempt entities includes, but is not limited to, the following:

• governmental entities,
• international organisations,
• non-profit organizations,
• pension fund companies,
• investment fund companies being ultimate parent companies,
• real estate investment companies being ultimate parent entities,
• entities where at least 95% of the nominal value of their shares is held, directly or through one or more entities, by entities, except for entities providing retirement pension services and those which conduct business activity consisting exclusively or almost exclusively in holding assets or running auxillary activity for the benefit of exempt entities only,
• entities where at least 85% of the nominal value of their shares is held, directly or through one or more entities, by entities, except for entities providing retirement pension services, provided their almost entire revenue comes from outstanding entities.

Please bear in mind that the revenue of the exempt entities will be accounted for when computing the threshold of the group’s annual consolidated revenue (EUR 750 million), although their financial figures will not be taken into consideration for the computation of the global minimum level of taxation.

The abovementioned entities have been proposed in the draft Act. However, these are not the only exemptions from taxation stated in the new regulations. The draft Act stipulates some restrictions and simplifications known as safe harbours. In special cases, provided the conditions specified in the regulations are met by a given group (eg it has to operate in less than 6 different jurisdictions, it has to exist for no more than 5 years, etc.), these will allow for no taxation at all or make the entities eligible for claiming 0% tax rate. To learn more about safe harbours and their types, please read our following articles.

Should you have any questions – or need to discuss the topic in detail – we strongly encourage you to contact our experts.