Pillar 2: Global Minimum Tax (15% Effective Tax Rate)

Pillar 2, also known as the GloBE Rules (Global Anti-Base Erosion Rules), forms the second pillar of the Two-Pillar Solution. It ensures that large multinational enterprise groups pay an effective tax rate (ETR) of at least 15% in every jurisdiction where they operate. Where the ETR in a jurisdiction falls below this threshold, a top-up tax is collected.

Pillar 2 comprises three mechanisms: the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR), and the optional Qualified Domestic Minimum Top-up Tax (QDMTT). The rules are based on OECD Model Rules and implemented through domestic legislation, without requiring an international convention.

The idea of a global minimum tax rate was discussed as early as the 1990s but remained politically blocked. In the BEPS context, it was revived by the OECD in 2019. The Pillar 2 Blueprint was published on 12 October 2020; the final political agreement was reached in October 2021. On 20 December 2021, the OECD published the GloBE Model Rules. The EU implemented Pillar 2 in the Minimum Tax Directive (2022/2523) on 14 December 2022. From January 2024, the rules entered into force in the EU, the UK, Japan, South Korea, and other jurisdictions. By end-2024, over 40 countries had enacted Pillar 2 legislation.

On 20 January 2025, US President Trump signed an Executive Order declaring that Pillar Two has no force in the United States and directing the Treasury to investigate retaliatory measures against countries imposing Pillar 2 taxes on US companies. In June 2025, the G7 agreed on a Side-by-Side approach to enable coexistence of Pillar 2 with the US tax system. In December 2025, the OECD published the Side-by-Side Package with detailed rules for the practical implementation of this coexistence.

Pillar 2 applies to MNE groups with consolidated annual revenues of at least EUR 750 million in at least two of the four preceding fiscal years. Exclusions apply for government entities, international organisations, non-profit organisations, pension funds, investment funds, real estate investment trusts, and the initial phase of international expansion. A substance-based income exclusion (SBIE) for payroll costs and tangible assets limits the impact in jurisdictions with genuine economic substance.

• Calculate effective tax rate (ETR) under GloBE rules per jurisdiction
• Collect top-up taxes where ETR falls below 15% via IIR (primary) or UTPR (backstop)
• Optionally introduce a QDMTT to secure tax revenue in the jurisdiction of residence
• Prepare and file the GloBE Information Return (GIR)
• Apply the substance-based income exclusion (SBIE)
• Apply safe harbours (transitional and permanent) to ease compliance
• Implement via domestic law based on OECD GloBE Model Rules

3 corrections:
- Pillar Two: Blueprint date is October 12, 2020, not October 14
- Pillar Two: Safe Harbours key_date is mislabelled
- Pillar Two: official_url returns HTTP 403
1 update:
- Pillar Two: Trump Executive Order and OECD Side-by-Side Package (2025) missing