Qualified Domestic Minimum Top-up Tax (QDMTT)

The Qualified Domestic Minimum Top-up Tax (QDMTT) is an optional mechanism within the Pillar 2 system that allows a jurisdiction to levy its own top-up tax on low-taxed income arising in its territory. This enables the subsidiary's jurisdiction of residence to capture minimum tax revenue before it can be collected by a foreign IIR or UTPR.

The QDMTT must meet OECD criteria for a 'qualified' regime, meaning it must be computed substantially in accordance with the GloBE rules. Jurisdictions with a recognised QDMTT are shielded from UTPR collection on their territory and receive an IIR credit protection (QDMTT Safe Harbour).

The QDMTT was incorporated as an optional building block in the GloBE architecture to incentivise low-tax jurisdictions to introduce their own minimum tax regimes. Conceptually outlined in the GloBE Blueprint of 2020, the qualification requirements were refined in the GloBE Model Rules (December 2021) and the OECD Administrative Guidance documents (February 2023 and in particular July 2023). Many low-tax locations — including Ireland, Switzerland, and Hong Kong — have enacted QDMTT rules to retain the tax base domestically and obtain UTPR protection. The Cayman Islands introduced a Corporate Income Tax designed to meet Pillar 2 requirements. By end-2024, around 30 jurisdictions had enacted or announced QDMTT rules.

Since 2024, the OECD Inclusive Framework has been conducting a peer review process to assess the qualification of national QDMTT regimes against GloBE standards.

The QDMTT applies to all constituent entities of an MNE group resident in the enacting jurisdiction that are within scope of the Pillar 2 threshold. It must be calculated on the same GloBE principles as the IIR/UTPR, but may contain permitted deviations (e.g. use of an Acceptable QDMTT Accounting Standard, as defined in the OECD Administrative Guidance of July 2023). A recognised QDMTT shields the jurisdiction from UTPR claims by other countries on low-taxed income arising in its territory. A QDMTT Safe Harbour allows simplified IIR computation for jurisdictions with a recognised QDMTT. Recognition has been subject to an OECD peer review process since 2024.

• Calculate the QDMTT according to GloBE principles: Substantial consistency with Model Rules required
• Levy a top-up tax: On low-taxed GloBE income within the jurisdiction's territory
• Meet OECD qualification criteria: For recognition as a 'qualified' QDMTT
• Priority collection (priority rule): The QDMTT is collected with priority and reduces the IIR/UTPR claim of other jurisdictions to zero for the relevant territory
• Benefit from the QDMTT Safe Harbour: To simplify IIR calculations for other jurisdictions
• Obtain UTPR shield protection: Through a recognised QDMTT
• Submit relevant information: In the GloBE Information Return (GIR)

3 corrections:
- key_date 2023-02-01 wrong: Ireland did not enact QDMTT in February 2023
- key_date 2022-12-20 mislabelled: Safe Harbours report, not Administrative Guidance
- official_url returns HTTP 403
4 updates:
- Missing mention of OECD QDMTT peer review
- key_dates missing: OECD Administrative Guidance February 2023
- key_dates missing: EU Minimum Tax Directive 2022/2523
- Number of QDMTT jurisdictions (over 30) difficult to verify
4 clarifications.
4 notes.