Ross Robertson
International Tax Partner, BDO UK
The OECD’s Pillar Two framework aims to ensure multi-national enterprises (MNEs) with global revenues above €750 million pay a minimum tax rate on income within each jurisdiction in which they operate. Commonly referred to as BEPS 2.0, the framework imposes a Top-Up Tax on profits arising in jurisdictions where the effective tax rate (ETR) is below 15%.
Irrespective of whether any top-up tax ends up payable, the compliance burden for affected organisations will be significant.
When will the new rules come into effect?
The core elements of Pillar Two are:
An Income Inclusion Rule (IIR), and
An Undertaxed Profits Rule (UTPR).
The timing of implementation for each element varies by territory. Most territories have opted to implement the IIR first – with the earliest movers having legislated for implementation from 1 January 2024 (accounting periods beginning on or after 31 December 2023). Implementation of the UTPR is expected to follow 12 months later – i.e. from 1 January 2025 at the earliest.
Who does Pillar Two apply to?
The rules apply to MNEs with annual consolidated revenues of at least €750 million in at least two out of the prior four accounting periods. Every global organisation with global revenues of €750m or more will need to act to be compliant with Pillar Two. In addition, organisations that are close to the threshold will need to actively monitor whether they continue to fall outside of scope and, if on a growth trajectory, take action to prepare for Pillar Two compliance when they cross the revenue threshold.
Do you have a plan in place to prepare?
Pillar Two will have short and long-term impacts. Large MNEs should expect a significant increase in compliance burden as the calculations are complex and many of the data points required may not currently be tracked, requiring updates to systems and changes to existing compliance processes.
Read our guidance
Stay up to date with our latest insights on Pillar Two:
Taxation of the Digital Economy – our summary of the OECD’s Two Pillar approach as well as our list of insights
Planning for Pillar Two – our webinar series
Join BDO's global team of international tax experts for a webinar series exploring the Pillar Two rules, which will be introduced from 1 January 2024 in many countries and represent a sea change for large multinational organisations.
In the webinar series, we will be exploring the technical and practical aspects of the rules, to enable affected organisations to prepare and respond effectively.