OECD Pillar 2 – Global Minimum Tax: What Action Should You Take?

G20 and 136 OECD Members have agreed to reform global tax by establishing a 15% global minimum tax rate. The UK government announced (based on draft legislation) that from 31 December 2023, large multinational businesses with consolidated group revenues of at least €750m per year will need to apply Pillar Two’s “Income Inclusion Rule” (IRR).

Who will be impacted?

IRR is a ‘15% multinational top-up tax’ and will apply to periods beginning on or after 31 December 2023, to multinational enterprises whose global consolidated turnover exceeds €750m in two of the previous four years accounting periods, and where foreign operations have an effective tax rate below 15%. The effective tax rate is calculated by a series of calculations for each of the relevant entities and permanent establishments.   

The Ultimate Parent Entity (UPE) will be responsible for reporting on behalf of the group. If the UPE is based in a territory that has not enacted IRR, the responsibility will fall on the highest group intermediary company, based in an IRR territory.

The UK is an early adopter of the legislation however other countries have started to enact similar legislation.

What are my reporting obligations?

The current UK draft legislation sets out the following requirements:

RegistrationNotification ReturnsTax Payable
Groups must register with HMRC when they first come into scopeAnnual UK return / overseas return notification, to confirm entities top-up tax liabilities must be submitted to HMRC within 15 months of accounting period end (18 months for first Return).Payment of the UK top-up tax liability due 15 months after the end of the accounting period end (18 months for first return).


  1. Monitor developments in global taxation to identify which territory any tax or reporting is due.
  2. Assess the impact to determine whether any additional tax is due and the resultant reporting obligations.
  3. Identify whether additional disclosures need to be included in upcoming financial statements.

3. Consider application of other relevant UK legislation (e.g. Diverted Profits Tax, Transfer Pricing) and the resultant impact on the group’s tax position.

4. Determine whether action should be taken to mitigate impact such as revised transfer pricing policies or restructuring.


  • Transfer pricing – Review your transfer pricing strategy and appropriate documentation.
  • Country by Country Reporting – Assist with annual reporting obligations
  • Anti-avoidance legislation – Consider application of other legislation such as Diverted Profits Tax, Controlled Foreign Companies or Profit Fragmentation.
  • Cross-border Transactions – Review cross-border transactions and resultant tax considerations such as withholding taxes, corporate interest restriction and thin capitalisation.

The above are just some of the areas in which we can assist and would be happy to discuss your international planning. Please contact Emma McCartney or Declan O’Connell if you have any specific enquires.

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