Pillar 2

Pillar 2, also known as the Global Anti-Base Erosion regime (GloBE), is a framework established by the OECD to ensure that multinational enterprises (MNEs) pay a minimum level of tax in each jurisdiction where they operate. The goal of Pillar 2 is to reduce tax competition and profit shifting among countries through the erosion of tax bases.

The GloBE regime applies to all MNE groups with an annual turnover of at least EUR 750 million. Under the regime, MNEs are expected to pay a minimum effective tax rate (ETR) of 15%. The OECD has published specific rules and guidelines to help MNEs meet these obligations. OECD countries will implement these rules in their domestic legislation. It is expected that that most OECD countries will implement the Pillar 2 rules in their domestic legislation for tax years starting on or after 31 December 2023.

MNE group’s that fall under the scope of Pillar 2, will have to determine whether the ETR in each jurisdiction in which they are active meets the 15% minimum rate. If the ETR in a jurisdiction is lower than 15%, a top-up tax is levied for the difference between 15% and the actual tax paid.

Pillar 2 rules & MNE groups

The Pillar 2 rules should in principle be applied fully for all jurisdictions in which the MNE group is active. As the Pillar 2 rules are detailed, compliance can be burdensome for MNE groups. To alleviate the Pillar 2 compliance burden for MNE group with activities in high-tax and low-risk jurisdictions, the OECD has introduced safe harbour provisions. If the conditions of the safe harbour provisions are met, the MNE group does not have make a full Pillar 2 calculation for that jurisdiction. A simplified calculation will than be sufficient to meet Pillar 2 requirements for that jurisdiction.

For the safe harbour calculations, CbCR data and data from the financial statements can be used. Coperitas enables user to have full control and perform the Pillar 2 safe harbour analysis inhouse. In case you require additional support understanding the Pillar 2 rules or interpreting the analysis outcome, our Transfer Pricing business partner Quantera Global is at your service.

Detailed information is required

Under the standard Pillar 2 rules, detailed information is required to determine the GloBE income and the covered taxes. To our experience, this information is not always readily available within each MNE group. And the information that is available, often needs to be adjusted before it can be used for Pillar 2 purposes. As the Pillar 2 rules are complex and detailed, the interpretation and application of the rules can also be burdensome for the group.

MNE group’s Pillar 2 landscape

Furthermore, the MNE group’s Pillar 2 landscape can change in the course of time. A jurisdiction that meets the minimum Pillar 2 tax rate in year 1, may drop below that rate in the next year. In order to stay in control, it is therefore necessary to monitor the group’s Pillar 2 position during the year.


And it is of particular importance to monitor jurisdictions that have an ETR that is just above the minimum GloBE rate. In these cases, it would be possible that the ETR will drop below the minimum rate due to events that take place during the year. Monitoring the ETR in those jurisdictions can provide the opportunity to make informed business decisions. This allows the management to take the possible Pillar 2 impact in its decisions and avoids negative surprises.

Pillar 2 filing obligations

Finally, the group will have to make sure that it meets its Pillar 2 filing obligations in each jurisdiction in which the group is active.
As the implementation of Pillar 2 progresses, it is essential for MNE groups to stay informed about new guidance, safe harbours, and other developments to ensure proper compliance with the evolving global tax landscape.

Pillar 2


In order to be able to assess the impact of Pillar 2 within an MNE group, the group will have to take various steps.

Step 1: Identify in which jurisdictions the group is active.

Step 2: Determine which entities and permanent establishments are in scope.

Step 3: Determine the GloBE income.

Step 4: Determine the covered taxes.

Step 5: Determine the Effective Tax Rate of all entities located in the same jurisdiction.

Step 6: Determine whether a safe harbour applies. I.e., does the Minimis Test, the Simplified ETR test or the Routine Profits Test apply?

Step 7: If no safe harbour applies, calculate the Top-Up Tax.

Practical solutions

For entities that are located in high-tax and low-risk jurisdictions, the OECD has however introduced safe harbour provisions to alleviate the compliance burden for MNEs. Contrary to the complex Pillar 2 rules, the safe harbour provisions allow the use of information that is readily available, i.e., information from CbCR reports and financial statements. MNEs can therefore choose to first make a high-level Pillar 2 analysis based on their CbCR data and data from financial statements, in order to verify whether they qualify for any of the safe harbours. A detailed calculation would then only have to be made for jurisdictions in which the safe harbours do not apply.

A good software solution can help to get insight into the group’s Pillar 2 position. Coperitas offers a pragmatic software solution that helps MNE groups to manage their Pillar 2 challenge. From our discussions with MNE groups, we learned that most tax directors prefer to get a high-level insight of the group’s Pillar 2 position first. By using information from CbCR reports and financial statements, MNE groups get a pragmatic insight in which jurisdictions the minimum tax rate most likely will be met and for which jurisdictions a top-up tax might be applicable.

The Coperitas software flags jurisdictions that do not meet the minimum tax rate based on the data imported in Coperitas. Coperitas also flags jurisdictions that meet the minimum tax rate based on the imported data, but only do so with a narrow margin. This approach allows our clients to monitor the Pillar 2 position of the jurisdictions in which they are active in a pragmatic way. It also allows MNE groups to easily get insight which jurisdictions qualify for any of the Pillar 2 safe harbour provisions.

For jurisdictions in which the ETR is lower than the minimum tax rate, Coperitas offers the possibility to include the detailed data that is required under the OECD Pillar 2 rules.


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FAQ - Pillar 2

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What is Pillar 2?

Pillar 2 is part of the OECD’s framework to address tax challenges arising from digitalization. The goal of Pillar 2 is to ensure that MNE groups pay a minimum level of tax regardless of their location.

How does Pillar 2 differ from Pillar 1 in the OECD's taxation framework?

Pillar 2 enables jurisdictions to tax profits that are subject to a low level of effective taxation in the source jurisdiction. In contrast, Pillar 1 introduces new nexus and profit allocation rules to market jurisdictions, even in the absence of physical presence.

What are the GloBE rules?

The Pillar 2 rules are also referred to as the Global anti-Base Erosion rules (“GloBE”) rules. The GloBE rules consist of (i) an income inclusion rule and (ii) an undertaxed payment rule.

Which MNE groups are affected by Pillar 2?

The Pillar 2 rules apply to MNE groups with an annual group turnover of more than EUR 750 million.

Which countries will apply the Pillar 2 rules?

As Pillar 2 is an OECD initiative, it is expected that Pillar 2 will mainly be implemented by OECD countries. EU Member States will have to implement the Pillar 2 rules in their domestic legislation, as the EU has issued a Directive that adopts Pillar 2.

When will the Pillar 2 rules enter into force?

This will depend on the domestic legislation of each participating country. EU Member States have to apply the income inclusion rules for tax years beginning on or after 31 December 2024 and the undertaxed payments rule for tax years beginning on or after 31 December 2024.

What is the minimum tax rate under Pillar 2?

Under Pillar 2, MNE groups should be subject to an effective minimum tax rate of 15%. If the ETR in a jurisdiction is lower than 15%, the income inclusion rule applies.

How does the income inclusion rule work?

The income inclusion rule demands that the ultimate parent company (or under certain circumstances the intermediary parent entity), includes an amount of income of a controlled foreign entity in its tax base in the jurisdiction where the latter and other MNE group entities are taxed below the global effective tax rate. The income inclusion rule is the primary rule to be applied.

How does the untertaxed payment rule work?

The undertaxed payment rule supplements the income inclusion rule and functions as backstop for situations in which the income inclusion rule is not applied. The undertaxed payment rule is applied at the level of a paying entity instead of the (ultimate) parent and increases the tax base of the payer. In practice this means that under the undertaxed payment rule deductions could be denied in the state of the payer, or an adjustment could be made by the tax authorities when a payment is made to a jurisdiction where the recipient of the payment will not be subject to the global minimum effective tax.

What are safe harbours in the context of Pillar 2?

To alleviate the compliance burden on MNEs, particularly in high-tax or low-risk jurisdictions, the OECD introduced safe harbours for the Pillar 2 (GloBE) rules. Safe harbours are essentially exceptions to the rules, that simplify the tax compliance process for MNEs. They help to reduce the complexity of tax regulations and lower administrative costs for both MNEs and tax authorities.

What is meant by Qualified Domestic Minimum Top-up Tax?

Countries can choose to introduce domestic top-up tax rules in order to ensure a minimum effective tax rate of 15%. If these rules meet OECD standards, the amount of Top-Up Tax on which the income inclusion rule or the undertaxed payment rule applied, is reduced by the amount of Qualified Domestic Minimum Top-up Tax that has been paid.

Which safe harbours does Pillar 2 provide?

There are three temporary (or transitional) safe harbours:

  • the De Minimis test,
  • the Simplified ETR test, and
  • the Routine Profits test.

The OECD also plans to introduce permanent safe harbours, which will not allow the use of CbCR data, but will enable simplified calculations. These will be provided in separate administrative guidance.

What is the De Minimis Test?

The de minimis test applies if the MNE group reports a total revenue of less than EUR 10 million and a profit before income tax of less than EUR 1 million in a jurisdiction. The test helps MNEs with small operations in a jurisdiction to avoid unnecessary compliance burdens. The de minimis test is based entirely on available CbCR data.

What is the Simplified ETR Test?

The simplified ETR test applies if the MNE’s ETR equals or exceeds the transition rate, which varies from 15% in 2023 and 2024 to 17% in 2026. This test uses profit before income tax based on CbCR data and covered taxes based on financial statements. The simplified ETR test aims to provide a more straightforward calculation method for MNEs to determine their ETR, ensuring that they meet the minimum tax requirements in the jurisdictions where they operate.

What is the Routine Profits Test?

The routine profits test applies if the MNE’s profit before income tax in a jurisdiction is equal to or less than a calculated substance-based income exclusion amount. This test aims to exclude MNEs with low-risk operations in a jurisdiction from the full GloBE rules, reducing the compliance burden for such entities.

For which years do the transitional safe harbours apply?

The transitional safe harbours apply for fiscal years 2023-2026.

Can MNEs choose which safe harbour they will apply?

Yes. MNEs can choose to apply any of these three safe harbours for a particular jurisdiction.

Can MNEs choose between the normal Pillar 2 regime and the safe harbours?

MNEs that qualify for a transitional safe harbour in a jurisdiction can either apply the safe harbour or the normal Pillar 2 regime. However, if an MNE qualifies for the safe harbours but opts for the normal regime in a certain year, it will not be possible to apply the transitional safe harbours in following years.

What is the GloBE information return?

The GloBE information return is a new reporting instrument under Pillar 2. It is intended to provide tax administrations with the information necessary to administer the Pillar 2 rules.

What type of information is expected to be reported in the GloBE information return?

The GloBE information return includes information on group entities that are in scope of Pillar 2, as well as detailed information that is needed to calculate the GloBE income, the covered taxes and the application of exclusions.

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