Pillar Two 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. 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.
Pillar Two Services & Resources
Pillar Two Assessment Services
Our team of international tax practitioners will help assess the likely impact of Pillar Two on your organization. Following a six-step process, we will:
- Conduct initial assessment to identify the MNE groups, including the filing and parent entities
- Remove any excluded entities
- Determine GloBE income, ETR and estimated top-up tax for MNE groups
- Identify permanent establishments
- Determine de minimis threshold
- Implement elections (GloBE Pillar Two Safe Harbor Election checklist)
Pillar Two Calculation Tool
The Pillar Two tax would be applied to MNEs 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.
CBIZ has developed proprietary software that precisely calculates an MNE’s effective global minimum tax rate and top-up tax liability for each of their jurisdictions. The initial automated calculation tool takes a sample dataset of underlying information and provides the following:
- GloBE income or loss
- Adjusted covered taxes
- Effective tax rate
- Substance-based income exclusions (carve-outs)
- Top-up tax rate
- Top-up amount
This calculation engine can be used regardless of the entity type and the number of jurisdictions the MNE has.
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