Updated
GL-G-04
01 / In 30 seconds
The short answer
- 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
02 / In plain words
What Global Minimum Tax / Pillar Two means
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.
A case from practice
A client asked whether it was worth building a structure on a scheme that had worked ten years ago. We explained the changed context: substance requirements, exchange of information, the global minimum tax for large groups. The decision was then made with reality taken into account.
When it is mentioned
- Planning an international group
- Assessing low-tax jurisdictions
- Restructuring a holding
- Discussing trends in tax transparency
- Choosing a country for the parent company
- Assessing the longevity of a structure
03 / What it covers
How the rules work
Who is covered
- Large international groups
- Revenue threshold
- Consolidated financial statements
Mechanism
- Calculating the effective rate
- Comparison with the minimum
- Topping up the difference
Where the top-up is paid
- Country of the parent company
- Other countries of the group
- According to the established order
Effect
- Reduced benefit of offshore jurisdictions
- Growing transparency
- Structures being reviewed
04 / How it works
How it works in essence
The group’s scope is determined
Whether group revenue is above the threshold.
The effective rate is calculated
Tax to profit in each country under Pillar Two rules.
Comparison with the minimum
A rate below 15% means there is a shortfall.
Topping up the difference
The difference is paid in the parent's country or another country of the group.
Group reporting
Special returns for the tax authorities.
05 / Key facts
What you need to know
01What it is
OECD rules
If a group's effective rate in a country is below 15%, the difference is topped up in another country of the group.
02Who is affected
Groups with revenue from €750 million
The threshold is consolidated revenue. Small and medium businesses are outside the rules.
03Mechanics
The effective rate
It is calculated under special rules, not from the headline rate in the law.
04What it changes
Profit shifting loses its point
What is underpaid in one country is topped up in another. Countries are adopting the rules at different speeds.
Common mistakes
Thinking the rules apply to any business
Check the group revenue threshold: for private businesses it is usually out of reach.
Building a structure on a low rate alone
Base the structure on real activity and presence.
Relying on last decade's schemes
Review the structure in light of information exchange and substance rules.
06 / Expert advice
How to prepare in advance
For most private clients these rules do not apply directly, but the general conclusion is important: structures whose only purpose is a low rate are becoming less and less sustainable. Planning is built around real activity and presence, not around tax arithmetic.
What we do for you. 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.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
International rules on a global minimum tax for large groups of companies, developed as part of the OECD’s work.
Directly — as a rule, no: the rules are aimed at large international groups with high consolidated revenue.
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.
The economic point of shifting profits to low-tax jurisdictions is sharply reduced: what is underpaid is topped up elsewhere.
Implementation in national legislation is proceeding at different speeds in different countries. The current status is checked for the particular jurisdiction.
Structures built solely on a low rate are losing their sustainability. It is worth planning around real activity and presence.
INITIAL ASSESSMENT
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We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
