Tax Planning
Effective Tax Planning for the Global Minimum Tax Era
With the rollout of global minimum taxation (especially in the EU under Pillar Two), strategic planning is essential—multinational groups must align structure and finance to avoid unintended tax burdens.
By NomadicTax Research Team • 5-8 min read • August 27, 2026
## Understanding Global Minimum Tax (Pillar Two)
- **What it is**: An internationally agreed framework aiming to ensure large multinational enterprises (MNEs) pay at least **15% effective tax** in each jurisdiction where they have significant operations. It seeks to reduce profit shifting and base erosion. Advisory firms such as KPMG and EY have provided extensive breakdowns of Pillar Two structure and its implications.
- **Who is affected**: Large MNEs above specified revenue thresholds (typically €750 million or currency equivalent) under the Inclusive Framework (OECD), and EU member states via EU directives implementing Pillar Two framework.
## Tax Planning Strategies to Consider
- **Benchmarking your effective tax rate (ETR)**: Identify jurisdictions where your ETR falls under 15%, and assess whether any top-up taxes or compliance costs might push you above the threshold. Use internal financial data to map out exposure under both domestic and Pillar Two frameworks.
- **Reassess Controlled Foreign Company (CFC) rules**: Some jurisdictions are harmonising CFC regimes to align with Pillar Two rules. Changes in the EU’s direct taxation Omnibus are already streamlining interaction between CFC rules and global minimum tax requirements. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?utm_source=openai))
- **Evaluate cross-border finance structuring**: With withholding taxes being abolished for dividends, interest, and royalties among EU companies under the new Omnibus proposals, flows between EU entities may become more efficient. But flows from or via non-EU jurisdictions still need careful tax treaty planning. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?utm_source=openai))
- **Consider group reorganisations and investment in R&D assets**: The EU proposals (Direct Taxation Omnibus) include **full and immediate expensing for R&D-related tangible assets**, encouraging investment. Groups should check whether their jurisdictions of operation have adopted or will mirror these rules. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?utm_source=openai))
## Actionable Advice
1. **Run an ETR gap analysis** now, using historical data. Model out scenarios including top-up tax obligations.
2. **Review jurisdictions’ CFC rules** and determine whether existing structures may trigger unintended liability under harmonised or renewed rules.
3. **Document your financing and intellectual property transactions** carefully, particularly within corporate groups, to ensure compliance with new withholding and transfer pricing environments.
4. **Stay current**: The EU Direct Taxation Omnibus proposals are still being developed; their exact adoption and domestic transposition timelines matter.
## Example
Suppose an EU MNE has a subsidiary in Country A with low corporate tax (e.g. 5%). Under Pillar Two, the group will be liable for a top-up tax to raise effective tax on profits in Country A up to 15%. If Country A lacks sufficient domestic rules, EU parent may face additional obligations under DAC or EU-level top-up regimes. Proper structuring—perhaps shifting IP ownership or financing—can reduce exposure.
**Bottom line**: With global minimum tax here, tax planning remains critical. Entities must proactively evaluate structures, align with evolving rules (especially in EU), and document all flows to avoid surprises.