Pillar Two Globe Minimum Tax

Pillar Two / GloBE 15% Global Minimum Tax v0.1

General reference only. This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

What this file is

This file is a content skill that loads on top of cross-border-workflow-base. It implements the OECD Pillar Two Global Anti-Base Erosion (GloBE) rules and the EU Minimum Tax Directive 2022/2523, in force from fiscal years starting on or after 31 December 2023 (IIR) and 31 December 2024 (UTPR).

Tax year coverage. Current for fiscal year 2025 as of currency date, reflecting OECD Administrative Guidance through July 2024 and the Agreed Administrative Guidance issued in February, July and December 2023.

The reviewer is the customer of this output. Pillar Two computations are jurisdiction-by-jurisdiction and ETR-sensitive; every output must be reviewed by a credentialed practitioner (typically a Big 4 or equivalent international tax specialist) before filing the GloBE Information Return.

Section 1 — Scope statement

This skill covers:

• Scope test: consolidated group revenue ≥ EUR 750 million in at least 2 of the 4 preceding fiscal years (Article 1.1 OECD Model Rules / Article 2 EU Directive).
• Three charging mechanisms: Income Inclusion Rule (IIR), Undertaxed Profits Rule (UTPR), Qualified Domestic Minimum Top-up Tax (QDMTT).
• GloBE Income / Loss computation starting from financial accounting net income, with the standard adjustments (Article 3).
• Adjusted Covered Taxes (Article 4), including current and deferred tax with the substance limitations.
• Effective Tax Rate (ETR) computation by jurisdiction (Article 5.1).
• Top-up Tax computation including the Substance-Based Income Exclusion (SBIE) (Article 5.3) and the de minimis exclusion (Article 5.5).
• Transitional CbCR Safe Harbour through fiscal years beginning before 1 January 2027 and ending before 1 July 2028.
• Permanent Safe Harbours where adopted (QDMTT safe harbour, simplified calculations safe harbour for non-material constituent entities).
• GloBE Information Return (GIR) filing mechanics, including the central filing election under Article 8.1.
• Interaction with US GILTI (treated as a non-qualified blended CFC tax post-2025), US CAMT, UK MTT/DTT, Korean Hyper-Local Adopting Pillar Two, Japanese IIR, and EU Member State implementations.

This skill does NOT cover:

• Pillar One (Amount A or Amount B) — see pillar-one-amount-a-b.md (forthcoming).
• Country-by-Country Reporting (CbCR) under BEPS Action 13 as a standalone obligation — covered by cbcr-beps-13.md (forthcoming).
• CFC regimes that exist independently of Pillar Two (e.g., German Hinzurechnungsbesteuerung, UK CFC charge) — see country corporate tax skills.
• Detailed deferred tax accounting under IAS 12 or ASC 740 — see ifrs-local-gaap-reconciliation.md.
• Transfer pricing methodology — see country *-transfer-pricing.md skills and transfer-pricing-workflow-base.md.

Section 2 — Filing requirements and key deadlines

Scope test (Article 1.1)

A group is in scope where consolidated revenue per the Ultimate Parent Entity (UPE) consolidated financial statements is EUR 750 million or more in at least two of the four fiscal years immediately preceding the tested fiscal year.

[T1] Mechanical test:

1. Identify the UPE and its consolidated financial statements prepared under an Acceptable Financial Accounting Standard.
2. For each of the four preceding fiscal years, read consolidated revenue.
3. If two or more of those years show revenue ≥ EUR 750m → the group is in scope for the tested year.
4. If the tested year is less than 12 months → annualise revenue by multiplying by 365 / number of days.

Excluded entities (Article 1.5): governmental entities, international organisations, non-profit organisations, pension funds, investment funds that are UPEs, real estate investment vehicles that are UPEs, and entities at least 95% owned by such excluded entities (subject to conditions).

Filing deadlines

[T1] First year deadlines for a calendar-year group:

• First fiscal year subject to IIR: 2024 (year ending 31 December 2024).
• First GIR due: 30 June 2026 (18 months after 31 December 2024).
• First UTPR fiscal year: 2025 (year ending 31 December 2025), GIR due 30 June 2027.

Section 3 — Rates and thresholds

[T1] SBIE rates by year (Article 9.2 transitional table):

Section 4 — Computation rules

Step 1 — Determine in-scope status

Apply the scope test in Section 2. If out of scope → STOP. Document the test for the GIR notification (some jurisdictions require even out-of-scope notification).

Step 2 — Identify constituent entities (CEs)

A constituent entity is any entity included in the consolidation, or excluded only on size/materiality grounds, including permanent establishments (Article 1.3). Map every CE by jurisdiction.

[T1] For each CE, record:

• Legal name and tax identifier
• Jurisdiction of tax residence (or location of PE)
• Whether it is a stateless CE, investment entity, insurance investment entity, flow-through, or hybrid
• Whether it qualifies as a minority-owned subgroup
• Ownership chain back to the UPE

Step 3 — Compute GloBE Income or Loss for each CE (Article 3)

Start from Financial Accounting Net Income or Loss before consolidation adjustments. Apply these adjustments:

Then aggregate to jurisdictional level: sum GloBE Income/Loss for all CEs in the same jurisdiction (with allocation rules for PEs, flow-throughs, and tax-transparent entities per Articles 3.4-3.5).

Step 4 — Compute Adjusted Covered Taxes for each CE (Article 4)

Covered Taxes (Article 4.2) include:

• Taxes on income or profits of the CE
• Taxes imposed in lieu of corporate income tax
• Taxes on retained earnings and corporate equity
• Taxes on distributed profits and deemed distributions

Covered Taxes EXCLUDE (Article 4.2.2):

• Top-up tax under the IIR
• Qualified Domestic Minimum Top-up Tax (when separately tracked)
• Disqualified refundable imputation taxes
• Taxes paid by an insurance company in respect of returns to policyholders

Adjustments (Article 4.1):

• • current tax expense for the year on income subject to GloBE
• • deferred tax adjustment (capped at 15% rate)
• • qualified refundable tax credits treated as income (already done in Step 3, ensure no double count)
• − any covered tax expense on income excluded from GloBE income
• − refunds/credits not treated as adjustments to current tax expense
• ± additional adjustments per Article 4.1.3

Deferred tax adjustment (Article 4.4):

• Recompute deferred tax at the lower of the actual statutory rate or 15%.
• Exclude deferred tax on items not included in GloBE income.
• Recapture rule: deferred tax liabilities that do not reverse within 5 years are added back to covered taxes in the year originally taken (Article 4.4.4). Exceptions for tangible asset, depreciation, lease, and similar long-tail DTLs (Article 4.4.5).

Step 5 — Compute the jurisdictional ETR (Article 5.1)

For each jurisdiction:

Jurisdictional ETR = Sum of Adjusted Covered Taxes (all CEs in jurisdiction)
                   ÷ Net GloBE Income (all CEs in jurisdiction)

Round to 4 decimal places. If GloBE Income is zero or a net loss → no top-up tax in that jurisdiction this year (but carry forward applies).

Step 6 — Determine Top-up Tax Percentage and Excess Profit

Top-up Tax % = 15% − Jurisdictional ETR    (if positive; otherwise 0)

Substance-Based Income Exclusion (SBIE) (Article 5.3):

SBIE = (Payroll carve-out % × eligible payroll)
     + (Tangible asset carve-out % × eligible tangible assets)

Use the transitional rates from Section 3.

Eligible payroll (Article 5.3.3):

• Salaries, wages, benefits, payroll taxes, employer social security
• For employees and independent contractors who participate in the ordinary operating activities of the MNE Group in the jurisdiction
• Excludes payroll capitalised into eligible tangible asset basis (to avoid double-counting)

Eligible tangible assets (Article 5.3.4):

• Net book value (average of beginning and end of year) of:
  • Property, plant and equipment located in the jurisdiction
  • Natural resources located in the jurisdiction
  • Lessee's right-of-use of tangible assets located in the jurisdiction
  • Licence or similar arrangement from government for use of immovable property or natural resources
• Excludes property held for sale, lease, or investment; inventory

Excess Profit = Net GloBE Income − SBIE
Top-up Tax (before QDMTT credit) = Top-up Tax % × Excess Profit

Step 7 — Apply de minimis exclusion (Article 5.5)

A jurisdiction is excluded from top-up tax for the year if both:

• Average GloBE Revenue over current and two preceding years < EUR 10 million
• Average GloBE Income over current and two preceding years < EUR 1 million (or a loss)

Election — made annually in the GIR for that jurisdiction.

Step 8 — Apply QDMTT credit and allocate residual top-up tax

If the source jurisdiction levies a Qualified Domestic Minimum Top-up Tax that the OECD Inclusive Framework has reviewed as qualifying, the QDMTT reduces the top-up tax computed at the IIR / UTPR level (Article 5.2.3). Where the QDMTT also meets the QDMTT Safe Harbour conditions (Admin Guidance July 2023), the IIR/UTPR top-up tax is automatically set to zero for that jurisdiction.

[T1] QDMTT credit decision tree:

1. Is there a QDMTT in the source jurisdiction? → No: skip.
2. Does the QDMTT qualify (OECD peer review status)? → No: tax paid is added to Covered Taxes but does not eliminate residual top-up tax.
3. Does the QDMTT meet the QDMTT Safe Harbour? → Yes: residual top-up tax under IIR/UTPR = 0. Stop.
4. Otherwise: Top-up Tax (post-QDMTT) = Top-up Tax (pre-QDMTT) − QDMTT paid. If negative → 0.

Allocation order:

1. IIR (Income Inclusion Rule) — top-up tax is charged at the Ultimate Parent Entity level (or first Intermediate Parent in an IIR jurisdiction). UPE jurisdiction has primary right.
2. UTPR (Undertaxed Profits Rule) — residual top-up tax is allocated to UTPR jurisdictions on the basis of the formula in Article 2.6: 50% by employees + 50% by tangible assets in the UTPR jurisdiction.

Step 9 — Apply safe harbours

[T1] Transitional CbCR Safe Harbour (Agreed Admin Guidance Dec 2022). Available for fiscal years beginning before 1 January 2027 and ending before 1 July 2028. The top-up tax for the jurisdiction is deemed zero if any one of these three tests is met using Qualified CbCR data:

[T2] Once-out-always-out: if a jurisdiction did not apply the transitional CbCR safe harbour in a year in which it was eligible, it cannot apply it in any later year. Reviewer must confirm continuity.

Step 10 — Compile GIR data points

The GIR requires entity-level data for every CE: jurisdiction, ownership, GloBE Income, Adjusted Covered Taxes, ETR, top-up tax, SBIE inputs, safe harbour status. Use the OECD-prescribed schema (XML).

Section 5 — Edge cases and special rules

5.1 Joint ventures (Article 6.4)

Treat the JV and its subsidiaries as if they were a separate MNE Group whose UPE owns directly. Compute a separate jurisdictional ETR. Allocate JV top-up tax pro rata to JV parents (under IIR principles).

5.2 Minority-owned subgroups (Article 6.4)

A subgroup with 30% or less ownership by the UPE is treated as a separate group for ETR/top-up calculations within the same jurisdiction.

5.3 Investment entities and insurance investment entities (Article 7.4–7.6)

Special elections allow taxable distribution treatment. Default: ETR computed separately for investment entities.

5.4 Permanent establishments (Article 3.4)

GloBE Income of a PE is allocated to the PE jurisdiction. Covered Taxes of the head office attributable to PE income are allocated to the PE jurisdiction. Where the PE jurisdiction does not tax (e.g., exempt PE), use the head office allocation rules with anti-avoidance constraints.

5.5 Flow-through entities (Article 3.5, 7.1)

If the flow-through is the UPE → it computes GloBE Income at the entity level after allocating to non-group owners. If the flow-through is held by group entities → income allocated up the ownership chain by tax residence of the owner.

5.6 Distribution tax systems (Article 7.3)

Estonia, Latvia, Georgia, and similar regimes that tax only distributions: an annual election allows a deemed distribution tax to be added to Covered Taxes, equal to the lower of (a) the actual top-up tax that would otherwise apply or (b) the distribution tax that would have applied if all GloBE Income had been distributed.

5.7 GloBE Loss carryforward and DTA recognition

• GloBE Loss election (Article 4.5): a jurisdictional election to create a GloBE Loss DTA equal to GloBE Loss × 15%. Once elected, becomes the sole carryforward mechanism for that jurisdiction.
• Standard DTL/DTA approach (Article 4.4): track deferred tax at the 15% cap with the 5-year recapture rule.

[T2] The GloBE Loss election should be reviewer-approved. It locks the jurisdiction into a simpler but less flexible mechanism. For most operating jurisdictions, the standard DTA/DTL approach is preferable.

5.8 Interaction with US GILTI

Following the OECD Administrative Guidance of February 2023, US GILTI is treated as a blended CFC tax. The GILTI tax paid by the US parent is allocated to CFC jurisdictions in proportion to the CFC's "blended CFC allocation key" (GloBE Income × ETR shortfall). The Inflation Reduction Act 2022 Corporate Alternative Minimum Tax (CAMT) is generally treated as a covered tax of the US parent.

[T2] For US-parented groups: the allocation methodology is mechanical but data-intensive. Confirm GILTI inclusion percentages, foreign tax credit positions, and BEAT exposure with US counsel before allocating.

[T3] Post-2025 GILTI changes (OBBBA P.L. 119-21). The OBBBA reduced the GILTI deduction from 50% to 40% (effective rate ~13.125% → ~15.75%) and the §250 FDII deduction commensurately. This affects whether GILTI exceeds the 15% threshold without further top-up at the CFC level. Escalate to US international tax specialist.

5.9 Interaction with EU Member State implementations

All 27 EU Member States transposed Directive 2022/2523. Key local variations:

5.10 Non-EU implementations as of FY 2025

Section 6 — Output specification

The reviewer brief must include:

1. Scope test result — group revenue history and conclusion.
2. Constituent entity register — every CE with jurisdiction, ownership, type.
3. Jurisdictional ETR table — for every operating jurisdiction:

Jurisdiction | GloBE Income | Adj. Covered Tax | ETR  | SBIE   | Excess Profit | Top-up % | Top-up Tax |
DE           | 100,000,000  | 18,000,000       | 18.0%| 12,000,000 | 88,000,000 | 0%       | 0          |
IE           | 250,000,000  | 31,250,000       | 12.5%| 8,000,000  | 242,000,000| 2.5%     | 6,050,000  |
...

4. Safe harbour analysis — per jurisdiction, which (if any) safe harbour applies and the evidence supporting it.
5. QDMTT credit table — by jurisdiction.
6. Allocation table — IIR amounts at the UPE, UTPR allocation to UTPR jurisdictions.
7. GIR filing schedule — designated filing entity, jurisdictions where notification is required, deadline list.
8. Year-over-year reconciliation — comparison to prior year top-up tax and ETR.
9. Reviewer questions — open items flagged as [T2] or [T3].

Section 7 — Self-checks

Before delivering output, verify:

• Scope test applied with revenue from UPE consolidated financial statements, not segment data.
• All CEs mapped, including PEs, flow-throughs, and stateless entities.
• GloBE Income adjustments applied per Article 3 — net taxes added back, excluded dividends/equity items removed.
• Deferred tax recomputed at the lower of statutory rate or 15%, with the 5-year recapture tracker.
• Jurisdictional ETR computed at the jurisdiction, not the entity.
• SBIE rates match the transitional table for the fiscal year.
• De minimis tested with the average over 3 years, not the single-year figure.
• Transitional CbCR safe harbour uses Qualified CbCR data, not cherry-picked figures.
• "Once-out-always-out" rule tracked at the jurisdiction level.
• QDMTT qualifying status verified against the OECD peer review list.
• GIR data points populated against the OECD XML schema fields.
• Interaction with US GILTI / CAMT, UK MTT/DTT, EU country implementations documented.
• Output flags every assumption requiring reviewer judgement as [T2] or [T3].

Section 8 — Prohibitions

• Do not compute Pillar Two at the entity level only. Pillar Two is jurisdictional.
• Do not apply the transitional CbCR safe harbour without verifying that the CbCR data is "Qualified" (CbCR prepared from Qualified Financial Statements per Admin Guidance Dec 2022).
• Do not treat US GILTI as a CE-level covered tax without applying the blended CFC allocation under Admin Guidance Feb 2023.
• Do not advise on Pillar Two structuring to reduce top-up tax (e.g., asset relocation, substance acquisition) without explicit escalation to a credentialed international tax specialist — anti-abuse rules (Article 9) and the GAAR-like override in Admin Guidance July 2023 ¶3 apply.
• Do not ignore the interaction with CFC, BEAT, Hybrid Mismatch, IRC §163(j), IRC §951A, or Subpart F. These regimes may already produce 15%+ ETR or may need to be unwound for the Pillar Two computation.

Section 9 — Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. Pillar Two is a complex, rapidly evolving area of international tax law with substantial financial exposure; every output must be reviewed and signed off by a credentialed international tax practitioner before the GloBE Information Return is filed or any structuring decision is taken.

The most up-to-date, verified version of this skill is maintained at openaccountants.com. Log in to access the latest version and track Administrative Guidance updates from the OECD Inclusive Framework.

Source: OpenAccountants — open tax Guides for AI, reviewed by named CPAs/CAs/EAs. Quality: source-cited draft. For always-current figures and named-accountant backing, connect the OpenAccountants MCP server (openaccountants-mcp).