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Global tax reform: the OECD pillars

Pillar Two – a global minimum tax?

Pillar Two of the OECD approach seeks to ensure that multinationals are subject to tax on their global income at a minimum rate of 15%, with the aim of reducing the incentive to shift profits to low tax jurisdictions.

Although the concept of a minimum effective rate of tax is simple, the proposed mechanism for achieving this is complex. Pillar Two consists of a combination of the “GloBE rules” (the 'income inclusion rule' (IIR) and the undertaxed payment rule (UTPR)) supported by a treaty-based subject-to-tax rule (STTR). The Pillar Two rules also allow jurisdictions to include provision for a Qualified Domestic Minimum Top-Up Tax (QDMTT). With all multinationals with an annual revenue of €750m or more in scope, these complex rules are likely to have a significant impact.

Progress on Pillar Two has gathered momentum. With model rules and accompanying commentary and administrative guidance published, attention has turned to domestic implementation. Key jurisdictions, including EU Member States following the adoption of the EU Minimum Tax Directive at the end of 2022, are now working towards these rules being in place from January 2024.

Freshfields tax insights – Pillar Two series

Navigating these new rules will not be straightforward. Our tax experts are here to help you find a way through the new tax landscape.

In this vlog, our tax partners Paul Davison and Robert Scarborough look at the potential for the OECD’s rules to impact US-headed groups – even if the US doesn’t implement Pillar Two.


In this vlog, our tax partner Bob van Kasteren talks about the potential impact of the OECD’s Pillar Two rules on joint ventures and how this risk should be allocated.

Navigating Pillar Two


Who is in your MNE group?


Does your MNE group have an effective tax rate below the minimum rate in any jurisdiction?


If yes, do the substance carve-out, loss carry-forward, or local tax carry-forward rules impact the analysis


How much top up tax do you need to pay?


Who will need to pay this and where?


What should you be doing now?

If you would like to discuss any of these issues in more detail, please get in touch with your local tax team for more information and access to further relevant content.