ED International Tax Reform—Pillar 2 Model Rules – Proposed amendments to the IFRS for SMEs Standard

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The “Exposure Draft ED/2023/1 International Tax Reform—Pillar Two Model Rules – Proposed amendments to the IFRS for SMEs Standard” was published by the International Accounting Standards Board (IASB) on June 1, 2023.

The Exposure Draft proposes amendments to the IFRS for SMEs (International Financial Reporting Standards for Small and Medium-sized Entities) Standard in response to the international tax reform and to align with similar amendments to IAS 12 Income Taxes.

The proposed amendments focus on Section 29 Income Taxes of the IFRS for SMEs Accounting Standard.

They are designed to address the impacts of the Organisation for Economic Co-operation and Development (OECD) Pillar Two model rules.

These rules aim to address the tax challenges arising from the digitalisation of the economy and introduce a minimum corporate tax rate of 15% for large multinational companies.

The key provisions included in the Exposure Draft are as follows:

  1. Temporary exception: The proposed amendments introduce a temporary exception to the requirements of recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. This exception is applicable during the period when Pillar Two legislation is in effect.
  2. Targeted disclosure requirements: The Exposure Draft suggests the introduction of targeted disclosure requirements for periods when Pillar Two legislation is in effect immediately upon the issue of these amendments and retrospectively in accordance with Section 10 Accounting Policies, Estimates and Errors of the IFRS for SMEs Standard. These requirements aim to enhance transparency and provide relevant information about the impacts of Pillar Two income taxes.
  3. Clarification on “other events”: The proposed amendments clarify that “other events” mentioned in the disclosure objective of paragraph 29.38 of the IFRS for SMEs Accounting Standard include enacted or substantively enacted Pillar Two legislation.

The IASB invites comments on the Exposure Draft.

Malaysian Accounting Standard Board (MASB) welcomes stakeholders to comment on the questions raised in the Exposure Draft.

Comments should be supported by specific reasoning and submitted to the MASB by email to [email protected] or email to the attention of the Executive Director by June 30, 2023.

It’s worth noting that these proposed amendments reflect an urgent response by the IASB to address the impacts of international tax reform on SMEs and represent a departure from the periodic review process typically followed by the IFRS for SMEs Accounting Standard.

The “Exposure Draft ED/2023/1 International Tax Reform—Pillar Two Model Rules – Proposed amendments to the IFRS for SMEs Standard” can be downloaded by clicking the attachment below:-



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