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Global Minimum Tax

What are countries doing to implement OECD’s BEPS Pillar 2.0?

Thomson Reuters Tax & Accounting  

· 7 minute read

Thomson Reuters Tax & Accounting  

· 7 minute read

As the Organization for Economic Co-Operation and Development’s (OECD) ground-breaking Base Erosion Profit Shifting (BEPS) framework for taxing the digital economy is being implemented, countries around the globe are beginning to roll out the second of the OECD’s two BEPS pillars—Pillar 2.0.

Pillar 2.0 aims to end the ‘race to the bottom’ on tax rates by ensuring that multinational enterprises (MNEs) pay a minimum effective corporate tax rate of 15%. Following is an overview of the Pillar 2.0 rules, as well as a summary of the implementation statuses of the countries that have agreed to adopt Global Minimum Tax as part of the OECD framework.

What are the OECD’s Pillar 2.0 Global Minimum Tax rules?

The purpose of the OECD’s Global Minimum Tax (GMT ) is to make it harder for large MNEs (those with more than €750 million in revenues) to avoid taxes by shifting profits to jurisdictions with lower tax rates. The GMT goes into effect on January 1, 2024, so affected companies are already planning for Pillar 2.0.

The OECD’s Model Rules for the GMT include three main rules and a fourth “subject to tax rule” that countries can use when developing tax treaties.

Rule 1: Income Inclusion Rule (IIR):  The IIR is one of two measures that allows profits taxed at less than 15% to be targeted for additional taxation. The IIR imposes a “top-up” tax on the ultimate parent entity of lower-taxed foreign subsidiaries to ensure that the parent entity consistently pays the 15% GMT in all jurisdictions where it is operating.

Rule 2: Undertaxed Profits Rule (UTPR): The UTPR is the second measure of the GMT aimed at creating equal taxation and operates as a backstop to the IIR. In cases where the IIR cannot be applied, the UTPR gives governments the power to deny deductions or take similar actions to collect taxes that otherwise would not be collected under the IIR.

Rule 3: Domestic Minimum Tax (DMT): Also known as the Qualified Domestic Minimum Top-up Tax (QDMTT), the DMT gives countries the option of collecting and keeping any top-up taxes that would otherwise flow overseas. Countries that implement a DMT are not subject to the measures imposed by the IIR and UTPR.

Rule 4: Subject to Tax Rule (STTR): The STTR enables developing countries to impose an additional withholding tax on certain cross-border payments (viz interest, royalties, services) that are otherwise fully or partially exempt under a tax treaty with a developed country to bring the total tax cost up to 9%. STTR taxes can be offset against the rest of the Pillar 2 taxes.

What are the business implications of the OECD’s Pillar 2.0 GMT rules?

Unlike the OECD’s Pillar 1.0, Pillar 2.0 is optional—however, more than 140 countries have already agreed to implement these new GMT measures. Businesses affected by the GMT will need to treat the next year or two as a transition period, one that may include an end-to-end re-evaluation of the processes and technologies necessary to collect the data these new rules require. Cash flow, financial disclosures, technology stacks, data management, department structures, workflows, tax strategies, and many other aspects of running a multinational business will be affected. There isn’t much time to prepare, although the OECD has published a framework of Safe Harbour reliefs available to businesses while Pillar 2.0 is being implemented.

What countries are adopting Pillar 2.0?

Though more than 140 countries have announced their intent to adopt Pillar 2.0, their timelines for implementation vary. Below is a summary of the status of major regions and countries that are adopting the OECD’s Pillar 2.0 and GMT:


  • The United States has not committed to Pillar 2.0 rules but has discussed several alternative approaches, such as aligning the U.S’s Global Intangible Low-Tax Income (GILTI) rules with Pillar 2 rules in a way that would make the resulting tax qualify as an IIR. The U.S. did institute  its own 15% corporate minimum tax on companies with $1 billion or more in annual earnings through the Inflation Reduction Act. However, the tax does not comply with Pillar 2.0 rules.
  • Canada has committed to implementing Pillar 2.0, with new measures set to take effect for fiscal years beginning on or after December 31, 2023.
  • Mexico plans to apply Pillar 2.0 regulation starting in 2024.
  • Most Latin American countries have not committed to adopting Pillar 2.0 rules, but Ecuador is on board, and Colombia is somewhere in between, with plans to implement its own 15% minimum tax rather than commit fully to Pillar 2.0


  • Japan has enacted Pillar 2.0 IIR regulations beginning April 1, 2024.
  • China has for years been pushing for the implementation of “digital taxes” on the profits of large technology companies. China helped develop BEPS Pillar 1.0 and 2.0 but has made no formal indications regarding local implementation of Pillar 2 rules.
  • South Korea: South Korea was the first country to enact new GMT rules to align with the OECD’s Pillar 2.0, in December 2022. The new rules are included in the Adjustment of International Taxes Act (AITA) and will be effective for fiscal years beginning on or after January 1, 2024.
  • Vietnam plans to begin applying Pillar 2.0 regulations beginning January 1, 2024.


  • The European Union has unanimously adopted Pillar 2.0, and Member States are required to incorporate the rules into domestic law by Dec. 31, 2023. The Income Inclusion Rule, or IIR, will take effect immediately thereafter, and UTPR provisions will go into effect on December 31, 2024. In the case of the European Union, there is the option to defer implementation to 31st December 2029 in case of a maximum of 12 UPE s (EU countries with likely no more than 12 UPEs include, Bulgaria, Croatia, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Romania Slovenia and Slovakia).
  • Germany, Denmark, and Norway have all backed BEPS 2 and voiced their support for the Global Minimum Tax. The German government has unveiled a preliminary Ministerial bill, while a public consultation concerning the draft statute is underway in Denmark. Norway has been active in OECD discussions and has highlighted the importance of including environmental, social, and governance factors in the design of the Global Minimum Tax.
  • The United Kingdom has enacted IIR and QDMTT rules effective December 31, 2023, and has proposed legislation to enact UTPR rules effective December 31.

Middle East:

  • Instead of adopting Pillar 2.0, the United Arab Emirates (UAE) implemented a Federal Corporate Tax Law on June 1, 2023, which sets the corporate tax rate in the UAE at 9%.


  • Australia will implement Pillar 2.0’s DMT and IIR rules beginning January 1, 2024, and adding UTPR rules in 2025.


  • With the exceptions of South Africa and Kenya, few if any countries on the African continent have announced plans to adopt Pillar 2.0, partly because most of them already have an effective corporate tax rate of 20% or more, and partly because of concerns about how the rules would affect developing countries. Discussions are ongoing.

Understanding the complexities of Pillar 2.0

In conclusion, as more countries around the world world begin to implement GMT as part of the OECD framework, companies must make sure they understand the potential implications and complexities of Pillar 2.0, as well as the reliefs available to them such as handling GMT calculations with an integrated platform.  Potential implications include financial statement disclosure in consolidated and local financial statements as early as 2023, quarterly tax provision calculations as early as Q1 of 2024 using local country calculation templates, Globe Information Returns as early as June 2026, and other filings (QDMTT, STTR and other supplemental returns). And because the global situation Pillar 2.0 is so fluid, it is important to stay updated on the latest developments in your region to ensure you are ahead of the curve.  Read our new white paper on the Pillar 2.0 global minimum tax regime.







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