Skip to main content

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, 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. The October framework uses a combination of the “GloBE rules” (the income inclusion rule and undertaxed payment rule) and a treaty-based subject-to-tax rule. The October agreement anticipates a minimum rate for the GloBE rules of 15 per cent.  With all multinationals with an annual revenue of €750m or more in scope, this is likely to have a significant impact.

An implementation plan was also published in October. This envisages that pillar two will be brought into law in 2022, and effective in 2023. This will potentially require changes to domestic law, the introduction of a new multilateral instrument and changes to bilateral tax treaties.

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 podcast, tax partner David Beutel and principal consultant Lea Bareil discuss the latest state of play on Pillar Two.

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.