Tax Planning
Tax Planning in the Era of Pillar Two: Aligning Strategies to the Global Minimum Tax
With Pillar Two (GMT) rules in full action and jurisdictions securing qualified Income Inclusion Rules, companies must revisit tax structures, financing, and cross-border operations for compliance and efficiency.
By NomadicTax Research Team • 5-8 min read • September 10, 2026
## Understanding Pillar Two / Global Minimum Tax (GMT)
Pillar Two, or the Global Minimum Tax (GMT), establishes a **15% minimum corporate tax rate** for large multinational enterprises. It’s meant to curb profit shifting and ensure that profits are taxed at a baseline level globally. The EU has incorporated these rules into its own directive (the Pillar Two Directive), which Member States are obligated to implement. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai))
## What Recent Updates Mean for Tax Planning
- **Cyprus’s Income Inclusion Rule (IIR)**: Although Cyprus was not previously recognized by the OECD Central Record, within the EU, it must be treated as **having a qualified IIR** for fiscal years starting **on or after 31 December 2023**. That means companies operating in or through Cyprus need not worry about misalignment on this front. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/pillar-2-global-minimum-tax-directive-new-faq-available-2026-05-29_en?prefLang=pt&utm_source=openai))
- **High adoption across EU countries**: Most Member States have implemented or are implementing IIR and/or the Domestic Minimum Top-up Tax (DMTT), meaning planning strategies need to assume alignment with Pillar Two in all these jurisdictions. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai))
## Planning Strategies to Stay Ahead
1. **Review your legal structure**: Entities in **low-tax jurisdictions or using holding companies** should assess whether their income may be subject to top-up tax or whether IIR applies.
2. **Finance structure and interest limitations**: Under ATAD and Pillar Two, excessive debt funding and interest deductions are under scrutiny. Ensure interest limitation rules align with both directives. ([oecd.org](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai))
3. **IP/royalty flows and withholding taxes**: The Omnibus proposal, part of the simplification package, aims to abolish withholding taxes on cross-border payments between EU companies for dividends, interest, and royalties. If adopted, this could influence where intellectual property is held. ([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))
4. **Use of exemptions and thresholds**: The proposed DAC recast increases the monetary threshold for small sellers under DAC7 and eases reporting for small like-size activities. Understand whether your revenue or sales fall under new thresholds to reduce compliance. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/a654ad8e-606b-4ad5-a8ff-3309554224d7_en?filename=Executive+Summary+of+Impact+Assessment_DAC_Proposal+for+a+Council+Directive+-+Taxation%E2%80%99.pdf&utm_source=openai))
## Example Plan
An EU-based tech firm, with parent in France and IP holding company in Cyprus,
- Ensures Cyprus’s IIR is fully aligned with EU requirements (for its purposes, it already is from end-2023).
- Structures royalty income under the Parent-Subsidiary Directive (if Omnibus is adopted), to leverage withholding tax elimination if all conditions met.
- Maintains debt levels respecting ATAD to avoid interest limitation issues.
## Key Takeaways
- Pillar Two is no longer theoretical: for most EU countries it’s now active or in implementation. Assuming “zero-tax jurisdictions” won’t be sufficient. Plan as if minimum tax applies across your operations.
- Proposed EU simplification measures mean opportunity: reduced reporting (DAC6, DAC7), higher thresholds, fewer duplication.
- Timing matters: proposals are circulating now. Once formally enacted, rules will apply going forward; decisions now on structure and operations can make a difference both for **tax liability** and **compliance cost**.
By aligning your tax planning to both existing Pillar Two rules and proposed simplifications under Omnibus and DAC Recast, you can secure more stable, predictable, and transparent outcomes across your EU operations.