Company: FRHC
Filing Date: 2025-06-13
Form Type: 10-K
Source: 0000924805-25-000012
Chunk: 140

Company: Freedom Holding Corp.
Filing Date: 2025-06-13
Form: 10-K
Item: Item 1A
Chunk 140
---
 aiming to ensure a minimum global effective tax rate ("ETR") of 15%. The primary mechanisms under Pillar Two include:

•Income Inclusion Rule ("IIR"): Applies at the level of the parent entity, imposing additional top-up taxes on the profits of constituent entities in jurisdictions with an ETR below the minimum threshold of 15%.

•Undertaxed Profits Rule ("UTPR"): Serves as a secondary or backstop rule to the IIR, applying a residual top-up tax on constituent entities where such top-up tax is not adequately captured by the IIR.

•Qualified Domestic Minimum Top-up Tax ("QDMTT"): Permits jurisdictions to implement domestic legislation imposing a minimum top-up tax, thus preventing other jurisdictions from taxing the same income under IIR or UTPR mechanisms.

The Global Anti-Base Erosion ("GloBE") rules are designed to be implemented consistently across jurisdictions as part of a common approach, fostering predictable outcomes for MNEs and mitigating the risks of double taxation or tax disputes. Moreover, the rules include administrative simplifications and transitional safe harbors to minimize the compliance burden for enterprises, especially during the initial years of implementation.

Compliance with the Pillar Two rules involves determining GloBE Income by making specific adjustments to financial accounting income, calculating Adjusted Covered Taxes to reflect taxes genuinely paid or accrued on GloBE income, and performing jurisdictional ETR computations. A Substance-based Income Exclusion allows MNEs to deduct routine profits associated with tangible assets and payroll expenses, thereby reducing taxable excess profits.

Given these comprehensive changes and their complexity, the OECD Inclusive Framework has provided detailed administrative guidance, transitional safe harbors, and penalty relief measures aimed at simplifying compliance during initial implementation. However, uncertainties and compliance burdens may still arise, especially during the initial implementation phases, leading to potential taxation risks, including double taxation, calculation complexities, and currency fluctuation impacts.

While entities within our consolidated financial statements monitor these rules closely to manage compliance risk effectively, particularly given the detailed administrative guidance and transitional safe harbors introduced by the OECD to alleviate some initial compliance burdens, we still face the risk of non-compliance and the associated tax liability risk.

Frequent tax law changes in regions where we conduct operations could adversely affect our business and the value of investments.

We are subject to a broad range of taxes and other compulsory payments, including, but not limited to, income tax, VAT and social contributions. Tax laws have been in force for a short period relative to tax laws in more developed market economies,