Global Minimum Tax/ Pillar Two
Global minimum tax of 15%
- What it is
- International rules on a minimum level of taxation for large groups of companies
- The main idea
- If the effective rate in a country is below the minimum, the difference is topped up in another country
- Who it is aimed at
- Large international groups with high turnover, not small businesses
- What it changes
- The point of shifting profits to low-tax jurisdictions is sharply reduced
- Does it concern you
- Directly — usually not, but the general trend towards transparency affects everyone
In plain words
Pillar Two is a set of international rules on a global minimum tax developed as part of the OECD’s work. In essence: if a group’s effective tax rate in a given jurisdiction is below the agreed minimum, the difference is topped up — as a rule, in the country of the parent company or another country of the group.
The rules are aimed at large international groups, for which a consolidated revenue threshold is set. Small and medium-sized businesses do not fall within them. The mechanism is based on the effective tax rate calculated under special rules, not on the headline rate in the statute.
The practical point for the market as a whole is that the economic benefit of shifting profits to low-tax jurisdictions is sharply reduced: what is not paid in one country is topped up in another. For our clients this is most often not direct regulation but part of the general context: the world is moving towards transparency, and structures built solely on a low rate are losing their point.
When it is mentioned
How the rules work
- Large international groups
- Revenue threshold
- Consolidated financial statements
- Calculating the effective rate
- Comparison with the minimum
- Topping up the difference
- Country of the parent company
- Other countries of the group
- According to the established order
- Reduced benefit of offshore jurisdictions
- Growing transparency
- Structures being reviewed
How it works in essence
- 01The group’s scope is determined
- 02The effective rate is calculated
- 03Comparison with the minimum
- 04Topping up the difference
- 05Group reporting
What you need to know
- The rules are aimed at large international groups
- For small and medium-sized businesses the threshold is out of reach
- The mechanism is based on the effective rate
- What is underpaid in one country is topped up in another
- Implementation in national law is proceeding at different speeds in different countries
Common mistakes
- Assuming the rules apply to any business
- Building a structure solely around a low rate
- Ignoring the general trend towards transparency
- Relying on schemes from the last decade
- Planning a structure without up-to-date advice
What this means for a BRIDGES client
We try to explain to clients not only the rules but also the direction in which regulation is moving. Structures designed for opacity and a low rate are short-lived today — and this is worth taking into account in planning.
Frequently asked questions
01 /What is Pillar Two?
International rules on a global minimum tax for large groups of companies, developed as part of the OECD’s work.
02 /Does this concern me?
Directly — as a rule, no: the rules are aimed at large international groups with high consolidated revenue.
03 /How does the mechanism work?
The group’s effective rate in a jurisdiction is calculated. If it is below the minimum, the difference is topped up in another country of the group.
04 /What does it change in practice?
The economic point of shifting profits to low-tax jurisdictions is sharply reduced: what is underpaid is topped up elsewhere.
05 /Do the rules apply everywhere?
Implementation in national legislation is proceeding at different speeds in different countries. The current status is checked for the particular jurisdiction.
06 /What is the conclusion for a private client?
Structures built solely on a low rate are losing their sustainability. It is worth planning around real activity and presence.
See also
Read next
This material has undergone editorial review by BRIDGES.
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