Pillar Two

Understanding the OECD’s Pillar Two framework

The OECD’s Pillar Two framework aims to ensure multi-national enterprises (MNEs) with global revenues above €750 million pay a minimum tax rate on income within each jurisdiction in which they operate. Commonly referred to as BEPS 2.0, the framework imposes a Top-Up Tax on profits arising in jurisdictions where the effective tax rate (ETR) is below 15%. 

Irrespective of whether any top-up tax ends up payable, the compliance burden for affected organisations will be significant. 

When will the new rules come into effect? 

The core elements of Pillar Two are: 

  • An Income Inclusion Rule (IIR), and  

  • An Undertaxed Profits Rule (UTPR). 

The timing of implementation for each element varies by territory. Most territories have opted to implement the IIR first – with the earliest movers having legislated for implementation from 1 January 2024 (accounting periods beginning on or after 31 December 2023). Implementation of the UTPR is expected to follow 12 months later – i.e. from 1 January 2025 at the earliest. 

Who does Pillar Two apply to? 

The rules apply to MNEs with annual consolidated revenues of at least €750 million in at least two out of the prior four accounting periods. Every global organisation with global revenues of €750m or more will need to act to be compliant with Pillar Two. In addition, organisations that are close to the threshold will need to actively monitor whether they continue to fall outside of scope and, if on a growth trajectory, take action to prepare for Pillar Two compliance when they cross the revenue threshold.  

Do you have a plan in place to prepare? 

Pillar Two will have short and long-term impacts. Large MNEs should expect a significant increase in compliance burden as the calculations are complex and many of the data points required may not currently be tracked, requiring updates to systems and changes to existing compliance processes. 

Read our guidance 

Stay up to date with our latest insights on Pillar Two: 

Planning for Pillar Two – our webinar series

Join BDO's global team of international tax experts for a webinar series exploring the Pillar Two rules, which will be introduced from 1 January 2024 in many countries and represent a sea change for large multinational organisations. 

In the webinar series, we will be exploring the technical and practical aspects of the rules, to enable affected organisations to prepare and respond effectively.  

Please accept statistics-cookies to see the content.

Our first webinar took place on Wednesday 6 December 2023, and addressed the following topics: 

  • Scope, Design, Basic computation principles for determination of the effective rate of tax and Examples of potential rate impacting transactions 

  • Forthcoming financial statement disclosure obligations for periods ending on or after 31 December 2023 

  • A suggested roadmap to compliance to include: An overview of safe harbours that may simplify compliance processes, and how to prepare for and undertake initial calculations. 

For detailed insight into Pillar Two across the US, EMEA and Asia Pacific, watch our webinar from January 2024: 

In February 2024, we investigate the role of Technology in Pillar Two compliance and the different approaches international businesses can take:

We’ll focus on the details of getting Pillar Two right, including returns, elections and disclosures and other reporting obligations. Scheduled for May 2024 

Please accept statistics-cookies to see the content.

Related insights

Key Contact