Understanding Pillar Two: the global minimum tax policy

The Global Anti-Base Erosion rules (GloBe), commonly known as Pillar Two, aims to introduce a minimum tax rate that reshapes how multinational enterprises are taxed across jurisdictions. For large companies and tax authorities alike, this shift brings new compliance requirements to either enforce or respond to, and a race to align systems before deadlines hit. As tax rules evolve, Moody’s helps businesses decode complexity, assess risk, and prepare confidently—ensuring readiness across jurisdictions and clarity in a rapidly changing landscape.

Below we answer the most commonly-asked questions about the Pillar Two tax rules rollout.

What is Pillar Two and why does it matter?

Pillar Two is part of the OECD/G20 Inclusive Framework’s two-pillar solution to address global tax challenges, particularly those arising from the digitalization of the economy. For countries that have adopted Pillar Two (approximately 140 in total) it introduces a “global” minimum tax (GMT) of 15% on the profits of large multinational enterprises (MNEs) operating in multiple jurisdictions.

The primary aim is to combat base erosion and profit shifting (BEPS) by ensuring that all in-scope MNEs pay a minimum level of tax wherever they operate—especially in low-tax jurisdictions. By leveling the playing field, Pillar Two seeks to reduce tax competition among countries and promote fairer tax practices globally.
 

Who is impacted and how is the €750 million threshold calculated?

The rules apply to multinational groups with annual consolidated global revenues of at least €750 million in at least two of the last four fiscal years. This threshold aligns with OECD Country-by-Country Reporting (CbCR) standards.

Commonly affected structures include those operating in low-tax jurisdictions, using intellectual property (IP) boxes, benefiting from notional interest deductions, or enjoying tax holidays and low-taxed financing arrangements. Even groups not currently subject to top-up tax must comply with reporting requirements. Businesses near the threshold or involved in M&A activity should monitor revenue closely to determine when they might fall within scope of Pillar Two requirements.
 

How is the effective tax rate (ETR) calculated?

The ETR is calculated on a jurisdictional basis by aggregating the earnings of all subsidiaries operating with the jurisdiction. Covered taxes include current and certain deferred taxes, though the calculation differs from traditional corporate tax rules.

If the ETR falls below 15%, a top-up tax is applied. The Income Inclusion Rule (IIR) imposes this tax on the ultimate parent entity (collected by the tax authority in this jurisdiction), while the Undertaxed Profits Rule (UTPR) acts as a backstop. Jurisdictions may also implement a Qualified Domestic Minimum Top-up Tax (QDMTT) to retain taxing rights locally. This would prevent a treasury transfer in a scenario where the company has earned excess profits in a low-tax jurisdiction.

Calculating ETR is complex: it blends accounting and tax data, requiring alignment between financial reporting systems and Pillar Two compliance obligations.
 

What are the compliance and reporting obligations?

Large, in-scope companies must prepare and file the GloBE Information Return (GIR), which includes detailed data on taxes, income, and adjustments for each jurisdiction. The GIR is submitted to the tax authority of the ultimate parent entity’s country and exchanged with other jurisdictions under the OECD framework.

The GIR demands over 100 complex data points, many of which are not captured by existing systems. Jurisdictions with a QDMTT may require separate local filings. Businesses must ensure data accuracy and upgrade reporting systems to meet these requirements.

The first GIR filings for calendar-year taxpayers are due by June 30, 2026, though some jurisdictions may enforce earlier deadlines. Early preparation is essential to avoid noncompliance risks.
 

How has the implementation timeline progressed?

Implementation varies by jurisdiction:

• The IIR and QDMTT took effect in many countries starting January 1, 2024 (for fiscal years beginning on or after December 31, 2023).
• The UTPR is generally delayed until 2026 or later.

Adoption rates differ. For example, the UK has implemented both the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) starting December 31, 2023. Other countries may diverge from OECD timelines or introduce country-specific rules, adding complexity. Companies must monitor developments in each jurisdiction to ensure compliance.
 

Has the United States implemented Pillar Two?

Despite robust adoption in Europe, there have also been notable non-adopters. In January 2026, the US Department of the Treasury, for example, announced that US-headquartered companies would be exempt from Pillar Two’s requirements. As such, the United States will not be implementing Pillar Two.¹
 

What should large companies do now ahead of the 2026 reporting season?

Preparation involves several key steps:

1. Conduct an impact assessment: Determine if your group is in scope and identify jurisdictions where top-up tax may apply. 
2. Evaluate data and systems: Identify gaps and ensure access to financial and tax data required for ETR calculations. 
3. Review organizational structures: Assess the impact of restructurings, M&A activity, or financing arrangements. 
4. Leverage safe harbors: Explore transitional safe harbors, such as simplified ETR tests using CbCR data. 
5. Engage stakeholders: Collaborate with tax advisers, auditors, and internal teams to build robust compliance systems. 

Starting early is critical. Pillar Two demands significant investment by way of time, resources, and expertise.
 

What challenges and opportunities do Pillar Two rules create?

Challenges:

• Data collection and reporting: The volume and granularity of required data may strain existing systems. 
• Compliance and investigations costs: New processes, technology, and staffing may be needed. 
• Global divergence: Jurisdictional differences could lead to legal and operational uncertainty. 

Opportunities:

• Policy alignment: The QDMTT allows countries to retain taxing rights, potentially simplifying compliance. 
• Operational restructuring: Large companies may reassess global tax strategies and streamline structures in response to Pillar Two. 
• Transparency: Enhanced data collection may improve decision-making and reduce tax risk. 

Tax authorities face their own unique challenges such as upholding compliance and resolving disputes, but also stand to benefit from increased revenue and improved international cooperation.
 

What can Moody’s do to help large companies and tax authorities prepare for Pillar Two?

A market leader for tax and transfer pricing data, Moody’s provides access to an unrivaled array of information, including company data, credit, ownership, and financial information used to support arm's length pricing, tax base erosion, and profit shifting assessment. We support more than 80 tax authorities globally, as well as more than 750 global professional services firms, and hundreds of multinationals to improve the quality, reliability, and efficiency of tax and transfer pricing outcomes.

Learn more about our tax and transfer pricing capabilities.