Planning for Pillar Two: How EU Businesses Can Navigate the Global Minimum Tax

What is Pillar Two (GloBE) in the EU Context?

Pillar Two, adopted through the GloBE (Global Anti-Base Erosion) model rules in Council Directive 2022/2523, sets a 15% minimum effective tax rate (ETR) on profits of large Multinational Enterprise (MNE) groups operating in participating jurisdictions. EU Member States, along with the UK, Switzerland, Norway, Iceland, Liechtenstein are part of the Inclusive Framework, meaning these rules apply through domestic implementation. (oecd.org)

From 2024 onwards, many EU Member States have enacted the Income Inclusion Rule (IIR), Undertaxed Payments Rule (UTPR), and some adopted Qualified Domestic Minimum Top-up Taxes (QDMTTs). (oecd.org)

Key Planning Considerations

• Know which jurisdiction is your UPE (Ultimate Parent Entity). If your group’s UPE is in a State that’s implemented central filing or qualified as a QDMTT, you may leverage central or filing mechanisms to reduce reporting burdens. Invest in early filings to benefit most from penalty relief under the common understanding among implementing jurisdictions. (oecd.org)

• Align CFC (Controlled Foreign Company) rules with Pillar Two. The EU’s tax simplification package (proposed in June 2026) aims to streamline CFC rules and harmonize them with Pillar Two to avoid overlap. MNEs operating in multiple EU jurisdictions should review their structures to avoid double counting or conflicting requirements. (taxation-customs.ec.europa.eu)

• Watch thresholds and safe harbours. The Pillar Two framework includes safe harbours for small entities, certain fiscal year anomalies, and substance‐based incentives. Thresholds, such as for top-up tax reporting and TIN (Tax Identification Number) verification, are under review under the DAC Recast. (taxation-customs.ec.europa.eu)

Compliance Actions

• Build capacity for central filing. If your jurisdiction has qualified, ensure systems are in place to support central filing of the GIR (GloBE Information Return)—this helps reduce local filings in multiple jurisdictions. Jurisdictions that implemented for 2024 have agreed to waive penalties locally when doing so. (oecd.org)

• Collect reliable data early. Maintaining accurate TINs, profit attribution, substance metrics, and benefit/non-benefit from tax incentives will be critical. Under DAC recast proposals, Member States are considering upgrading TIN verification systems and removing low-value reporting. (taxation-customs.ec.europa.eu)

• Monitor national implementation timelines. Though Directives provide high-level obligations, each EU Member State must transpose them into national law. Differences may persist in effective dates of IIR, UTPR, and QDMTT application. Non-EU EEA states like Norway and Switzerland have their own domestic paths. Reference OECD's Central Record for updates. (oecd.org)

Practical Example

Imagine an EU-based MNE with operations in Spain, Poland, and Switzerland. The UPE is in Spain, which implemented IIR and participates in central filing. Switzerland is a QDMTT jurisdiction, but Poland relies on UTPR. The group:

• Files the GIR centrally in Spain.
• Spain shares data with Poland (where UTPR may trigger).
• Switzerland's QDMTT ensures Swiss subsidiaries are covered locally.

Reviewing transfer pricing, substance, and benefit from incentives such as R&D accelerated expensing will help avoid low ETR outcomes. The tax simplification package proposed in June 2026 includes a measure to allow full and immediate expensing for R&D-related tangible assets across Member States. (taxation-customs.ec.europa.eu)

Action Plan Checklist