Pillar Two Global Minimum Tax Compliance
Pillar Two, commonly referred to as the “global minimum tax” or “GloBE,” establishes minimum tax rules to ensure large multinational enterprises (MNEs) pay a minimum effective tax rate of at least 15%, calculated based on a specific rule set. More than 140 countries have agreed to enact Pillar Two tax reform, which comprise the majority of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.
The Pillar Two model rules will have a far-reaching effect on the taxation of MNEs, especially those with an effective tax rate below the minimum in any jurisdiction, which would be required to pay a top-up tax to their corporate headquarters location.
The tax would be applied to groups with revenue of at least €750 million (currently roughly $800 million) per year. In addition to the obligation to pay a top-up tax under Pillar Two, failure to comply with the filing requirements within 15 months after the fiscal year end of each constituent entity results in a penalty equal to 5% of revenue for the entity that does not meet the filing requirements.
Please view our Pillar Two Q&A to learn more about the global minimum tax requirements, implementation, and – in some cases – hidden benefits of Pillar Two regulatory requirements.