IASB Exposure Draft ED/2023/1 International Tax Reform—Pillar Two Model Rules


The International Accounting Standards Board (IASB) published the Exposure Draft International Tax Reform—Pillar Two Model Rules which proposed amendments to IAS 12 Income Taxes. The proposed amendments aim to provide temporary relief from accounting for deferred taxes arising from the imminent implementation of the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD).

The Pillar Two model rules are part of a two-pillar solution to address the tax challenges arising from the digitalisation of the economy and were agreed by more than 135 countries and jurisdictions representing more than 90% of global GDP. The Pillar Two model rules:

(a) aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate; and

(b) would achieve that aim by applying a system of top-up taxes that results in the total amount of taxes payable on excess profit in each jurisdiction representing at least the minimum rate of 15%.

The IASB is responding to stakeholders’ concerns about the potential implications of these rules for the accounting for income tax in financial statements. In particular, stakeholders were concerned about the uncertainty over the accounting for deferred taxes arising from the rules. They said there was an urgent need for clarity in the light of the imminent implementation of these rules in some jurisdictions.

The proposals in the Exposure Draft would introduce:

(a) a temporary exception to the accounting for deferred taxes arising from the implementation of the Pillar Two model rules; and

(b) targeted disclosure requirements.

The IASB expects the proposed amendments to provide timely relief for affected entities and avoid inconsistent interpretations of IAS 12 developing in practice. It would also require an entity to provide specific information to users of financial statements before and after the Pillar Two model rules are in effect.

The IASB will consider the comments it receives on the Exposure Draft and will decide whether to proceed with the proposed amendments. The IASB plans to complete any resulting amendments in the second quarter of 2023.

Click here to download the Exposure Draft.

Invitation to comment

The Exposure Draft is open for comment until 15 February 2023.

You may provide your comments via email to us at technical@masb.org.my.

Click here to submit your comments.