Key updates on the global implementation of Pillar 2

Vikas Vasal,
Brett Curtis,
Christina Busch,
Peter Vale,
Jacob Mook,
David Sandison,
Matt Stringer,
David Sites
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In October 2021, more than 130 countries agreed to implement a minimum 15% corporate tax rate for certain multinationals (global turnover over €750 million) as part of the second of the two pillars in the OECD’s ground-breaking taxing the digital economy framework. Here, we round-up the progress on implementation in a selection of leading global economies. We also look at the impact on businesses, likely go live timings and what could potentially delay the process.

What are the Pillar 2 rules?

Pillar 2 arose out of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project and aims to end the ‘race to the bottom’ on tax rates by ensuring that multinationals pay a minimum effective corporate tax rate (of 15% regardless of the local tax rate or tax base).

The OECD released its proposed Model Rules and commentary for Pillar 2 in late 2021 and early 2022. The Model Rules provide details on two interlocking measures, the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), whereby profits taxed at less than 15% would be targeted for additional taxation. The IIR imposes a top-up tax on the ultimate parent entity of a low-taxed foreign subsidiary. The UTPR seeks to deny deductions, or take similar actions,  to collect tax that would otherwise not be collected under the IIR.

In addition to these two rules, countries signed up to Pillar 2 may also choose to implement a Domestic Minimum Tax (DMT) which would take precedence over these and ensure any top-up tax which would otherwise flow overseas is collected in the territory in which the profits are generated.  
More recently, the OECD published:

  • a framework on Safe Harbours and Penalty Relief (released in December 2022) – providing details on the transitional reliefs available to businesses over the initial years of Pillar 2 implementation
  • administrative guidance (released in February 2023) – aiming to provide clarity over contentious areas of the Model Rules and aiming to provide greater certainty for businesses impacted by Pillar 2. 
What the OECD implementation package means for you
What the OECD implementation package means for you
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In order to implement Pillar 2, each country will enact the rules into its local legislation. Although the OECD remains committed to an ambitious timeline (with the intention for the initial stage of implementation by the end of 2023) there is not a global consensus on an appropriate timeline. 
We provide a summary of the latest updates from key jurisdictions below:

Australia     Germany     Singapore     Ireland     The Netherlands     United Kingdom     United States


The current Australian Labor government came to power last year committed to implementing the proposed Pillar 2 reform measures to prevent a ‘race to the bottom’ on corporate tax rates, and to protect the corporate tax base.

In October last year a public consultation paper was released seeking feedback from the Australian business community with respect to domestic implementation of the measures, ways to minimise compliance costs, and the possibility of implementing a DMT.

In its latest Federal Budget delivered on 9 May, the government confirmed that it will implement key aspects of Pillar 2 as follows:

  • a 15 per cent global minimum tax for large MNEs with the IIR applying to income years starting on or after 1 January 2024 and the UTPR applying to income years starting on or after 1 January 2025
  • a15 per cent DMT applying to income years starting on or after 1 January 2024.

The DMT was unsurprising with the government expressly commenting that a DMT would give Australia first claim on top-up tax for any low-taxed domestic income.

Draft legislation in line with the OECD Model Rules is expected sometime this calendar year. The draft legislation is expected to be subject to further public consultation before its ultimate enactment and will be subject to OECD review to ensure it is consistent with OECD Model Rules.  


Being an EU-member state, Germany is obliged to implement the Pillar 2 EU directive into national law by the end of this year with a first-time application in 2024. Respectively, three months after the release of the OECD´s 'Safe Harbour and Penalty Relief' simplifications and the resolution of the corresponding EU Directive, the German Federal Ministry of Finance published a discussion draft of the national law for the implementation of the EU Directive for a global minimum tax on 20 March 2023 being applicable from the first fiscal year beginning after 30 December 2023.

The introduction of the 'undertaxed payment rule' is planned for 2025. The discussion draft is strongly oriented towards the OECD Model Rules as well as the corresponding EU Directive and includes the (transitional) safe harbour regulations and simplifications of the OECD. However, the draft also contains some German concretisations and amendments, for example, the introduction of DMT in the event that the top-up tax arises abroad that is attributable to Germany. 

In addition, national regulations on the taxation procedure were included in the discussion draft, for example the establishment of a so-called minimum tax group (Sec. 3 MinStG), the obligation to electronically submit a 'minimum tax report' to the Federal Central Tax Office (Sec. 67 MinStG), tax declaration and payment obligations (Sec. 84 MinStG) as well as a double taxation treaty override ruling (Sec. 88 MinStG).

In the German discussion draft, numerous procedural aspects remain open, such as the exact implementation of subsequent adjustments through tax audits in Germany and abroad or the implementation of the 'Dispute resolution mechanism' as proposed by the OECD’s consultation paper on 'Tax certainty'. The OECD's proposals of 20 December 2022, on so-called 'Penalty reliefs' were also not adopted. Instead, the German discussion draft merely includes general provisions on fines, which are to apply in the event of intentional or frivolous infringement of the tax obligations. The exact severity of possible sanctions and fine provisions in the event of non-compliance with the regulations remains unclear.  

In view of the narrow time window until first-time application from next year and numerous open aspects, the further legislative process should be closely monitored.


Singapore is a signatory to the ‘inclusive framework’ and would therefore be obliged to bring taxation into line with OECD Pillar 2; however, the question of whether this is something Singapore would have chosen otherwise remains open.

There are currently around 1,800 companies in Singapore which are part of a multinational group with consolidated revenues of over €750 million. While the country’s headline corporate tax rate is 17%, an array of reliefs and reductions mean that most of these multinationals are currently paying less than 15%. The impact of Pillar 2 on Singapore could therefore be significant.

Tax incentives have helped Singapore to attract investment. But a peer review conducted in 2015 concluded that the most common tax incentives are not harmful tax practices. The country has always applied rigorous substance rules and many of these will continue. But under Pillar 2, Singapore could now be subject to a different set of formulaic substance-based carve-outs. This could end up being just another layer of rules for rules’ sake.

Less attention has focused on what would happen if Singapore followed the UK in considering a DMT alongside the OECD measures. As these are CFC rules without the activity carve-out, they could turn the country’s source-based system of taxation on its head. 

That question has now been answered to a degree. In February 2023, the Singapore government stated its intention to implement the GloBE rules as well as introduce a DMT with effect from any affected company’s financial year that starts on or after 1 January 2025. However, the government assured taxpayers that it will continue to monitor the developments around the world and adjust its implementation timeline, as needed, if there are delays internationally. It will also continue to engage businesses and provide them with sufficient notice ahead of any rules becoming effective. 


With a corporate tax rate of 12.5%, there was concern initially in Ireland with a proposed 15% (or higher) global minimum corporate tax rate. Nonetheless, Irish policymakers have broadly welcomed the Pillar 2 agreement as it removes the possibility of even higher increases. At 15%, the tax rate remains very competitive.

In addition, the existing 12.5% rate will be retained for groups with global turnover of less than €750 million. Only a small number of Irish businesses will fall into the Pillar 2 net.

Like many other EU states, Ireland’s domestic legislation is intended to follow the EU directive, with consultation phases on the wording of the proposed legislation well underway.

It is expected that the final legislation will be signed into law before 31 December 2023, in line with the EU Directive requirements. The new rules will be effective 1 January 2024.

The Netherlands

On 31 May 2023, the Dutch government published the final legislative proposal for the implementation of Pillar 2 as per 1 January 2023. Our Dutch tax specialists are working hard on a seven-step approach to tackle the compliance process that the new legislation introduces, and to help companies take the first step from theory to practice. 
If you are interested in this approach and further updates in the Netherlands, please visit the Grant Thornton Netherlands Pillar 2 page.

United Kingdom (UK) 

On 1 April 2023, the main rate of corporate tax in the UK rose to 25% from 19% and the UK has welcomed the introduction of the global minimum tax.
The UK tax authority (HMRC) opened a consultation into the Pillar 2 implementation in early 2022, shortly after the release of the OECD Model Rules and had initially set a tight timeframe for implementation of 1 April 2023. As a result of representations made during the consultation process, the UK pushed back its proposed implementation date to 31 December 2023 for the IIR.

The UK released draft Pillar 2 legislation in July 2022. This has subsequently been revised and was finalised and released as part of the 2023 Finance Bill (released on 23 March 2023). The Bill is currently going through parliamentary process in order to receive Royal Assent and enactment.

It is expected that the Bill will be enacted in June or July 2023, before the UK summer parliamentary recess. As part of the finalised legislation the UK has also introduced details on its proposed DMT to sit alongside the IIR, both of which will be effective for accounting periods starting on / after 31 December 2023. The UK is expecting to bring in the UTPR with effect from 31 December 2024.

United States

Implementation of Pillar 2 in the US remains stalled, as proposed changes to the current US global minimum tax — the tax on global intangible low-taxed income (GILTI) — were left out of the recently enacted tax reconciliation bill, the 'Inflation Reduction Act.'

While the Inflation Reduction Act does include a new 15% minimum tax on financial statement income for certain large corporations, the new tax is likely not a QDMTT per OECD parlance. Previous proposals to change GILTI were not included in the final text of the 'Inflation Reduction Act' and now appear unlikely to be enacted this year.  

Some lawmakers hoped these changes would be enacted to align the U.S. regime with Pillar 2. The proposals included amending GILTI to apply on a country-by-country basis and increasing the GILTI effective tax rate to 15.8% were not included in the final text of the Inflation Reduction Act and now   appear unlikely to be enacted this year. 

Republicans now control the U.S. House of Representatives and are unlikely to support international tax reform (ie, conforming amendments to GILTI) without significant changes. Thus, the outcome for enactment of international tax legislation in the near-term is ambiguous — and could prove difficult. Still, the looming Pillar 2 deadline could help spur action. What seems more likely is that significant tax legislation will have to wait until after the 2024 U.S. election cycle.

Depending on the outcome of those elections, the prospects for Pillar 2 legislation in the United States could change. Simultaneously, the political fallout of double tax on U.S. multinationals and U.S. tax revenue leakage could create tremendous pressure for U.S. lawmakers to implement changes in the U.S. 

U.S. GILTI as a CFC tax 
As part of the OECD administrative guidance released in February 2023, there was clarification on the allocation of taxes arising under blended CFC regimes. The guidance on CFC regimes appears specifically designed to address the treatment of the U.S. GILTI regime.

The guidance specifically cites GILTI as an example of a blended CFC tax regime and provides that GILTI is an acceptable CFC tax under the GloBE rules. It commonly references GILTI within the provided examples. The treatment of GILTI and CFC taxes is applicable only for a limited time, however, for fiscal years beginning on or before 31 December 2025. It will be re-evaluated for fiscal years that end after 30 June 2027.  

Grant Thornton Insight: The guidance will essentially respect GILTI as somewhat equivalent to an IIR for a two-year interim period despite the fact that it its effective rate is currently less than 15% and it is not applied on a country-by-country basis. The OECD guidance provides detailed rules for allocating GILTI among CFCs in different jurisdictions. In order to allocate a blended CFC tax from a constituent entity-owner to the individual constituent entities, the OECD states that the allocable blended CFC tax is the amount of tax liability incurred by the constituent entity-owner under the blended CFC tax regime.

The way forward 

There has been significant progress in   many territories with regards to Pillar 2, particularly in the last six to nine months. There are now a number of territories with strong commitment to implement the IIR (and DMT in some cases) by the end of 2023. With less than eight months to go in such countries, it is important businesses use the time available to ready themselves for the introduction of these rules. It is also important to keep a close eye on legislative developments globally and their potential impact as more countries push towards implementation. 
If you would like to discuss any aspect of Pillar 2 and how it may affect your business in further detail, please contact one of the authors below or speak to your local Grant Thornton expert.