Belgium Issues a Circular on Pillar Two Currency Conversion

Circular 2026/C/41, dated March 17, 2026, is an amendment to Belgium’s general Pillar Two Guidance (Circular 2025/C/68). Its purpose is to clarify two currency-conversion questions that arise under Belgium’s Pillar Two regime where the group’s consolidated financial statements are expressed in a currency other than euro: first, how amounts in those accounts are tested against euro-denominated thresholds in the Belgian Global Minimum Tax Law (Law of 19 December 2023); and second, how a top-up tax computed in another currency must be converted when the amount is due in Belgium. The circular expressly says that it provides that clarification by reference to the OECD’s 2025 Consolidated Commentary.

The statutory backdrop remains the Law of 19 December 2023. Article 2 provides that the law transposes Directive (EU) 2022/2523 and ensures the minimum tax through three Belgian charging mechanisms: the domestic top-up tax, the IIR and the UTPR. 

The law also already embeds the accounting-standard and foreign-exchange architecture that makes the circular necessary. Article 8, §1 starts the Belgian GloBE computation from the constituent entity’s financial accounting net income or loss, before consolidation eliminations, using the accounting standard employed for the UPE’s consolidated financial statements. 

The OECD baseline on currency conversion

The OECD Consolidated Commentary (2025) is the starting point for currency conversion. Paragraph 17.1 states that, to ensure co-ordination and consistency, MNE groups must undertake their GloBE calculations for each relevant jurisdiction in the presentation currency of their consolidated financial statements, regardless of the local currency of the jurisdiction concerned.

Paragraph 17.2 then says that amounts not already translated into the presentation currency must still be translated for GloBE purposes using the currency translation principles of the authorised accounting standard used to prepare the consolidated financial statements, such as IAS 21 or ASC 830. The Commentary to Article 3.1 makes the same point in relation to GloBE income or loss.

The OECD also distinguishes that computational step from the final conversion of the tax liability into local currency. Paragraph 17.3 of the Consolidated Commentary provides that, once the top-up tax allocable to a constituent entity has been determined in the MNE group’s presentation currency, jurisdictions are free to apply their own foreign-currency translation rules to convert the liability into local currency, so long as the rate is reasonable and relevant to the fiscal year. The OECD expressly gives three acceptable examples: the average exchange rate for the fiscal year, the exchange rate on the last day of the fiscal year, or the exchange rate on the date payment is required. Paragraph 17.4 adds that jurisdictions should adopt specific domestic rules to provide certainty.

The OECD’s threshold rules are equally prescriptive. Article 1.1 of the Model Rules applies the regime to MNE groups with annual revenue of EUR 750 million or more in at least two of the four preceding fiscal years. The 2025 Consolidated Commentary explains how those euro-denominated thresholds must be rebased when the domestic law or the group’s presentation currency differs. Under paragraph 20.1, the group must translate the relevant thresholds from its presentation currency into the currency used in the implementing jurisdiction’s domestic law using the same average exchange rate for December of the calendar year before the relevant fiscal year; if the domestic threshold is expressed in euro, ECB rates are used, with a central-bank fallback where the ECB does not quote the currency; if the domestic threshold is expressed in a non-euro currency, the implementing jurisdiction’s central-bank rate is used. Paragraph 20.2 adds that prior-year thresholds are not recalculated each year with a fresh rate, and paragraph 20.4 accepts that this methodology may produce counter-intuitive outcomes in some cases.

Circular 2026/C/41

The circular’s first operative rule is that MNE groups must perform their minimum-tax calculations for each relevant jurisdiction in the presentation currency of the consolidated financial statements, regardless of the local currency of the jurisdiction concerned. Its second rule is that amounts not already translated into that presentation currency must be translated specifically for minimum-tax purposes under the currency-translation principles of the financial reporting standard used to prepare the consolidated accounts, with IAS 21 and ASC 830 given as examples. In substance, paragraphs 3 and 4 of the circular map directly onto paragraphs 17.1 and 17.2 of the OECD Consolidated Commentary.

The next step is where Belgium makes its own domestic choice. Paragraph 5 of the circular acknowledges, in the same terms as OECD paragraph 17.3, that once the allocable top-up tax or equivalent adjustment has been determined in the group’s presentation currency, jurisdictions may choose a reasonable and relevant conversion rule for the liability payable in local currency. Paragraph 6 then fixes the Belgian rule: for top-up tax due in Belgium under the Law of 19 December 2023, the presentation currency must be converted using the ECB reference exchange rate on the last day of the reporting year, and that rule applies to all three Belgian charges – the domestic top-up tax, the IIR top-up tax and the UTPR top-up tax. 

The circular then turns to monetary thresholds. Paragraph 7 states that where an MNE group prepares its consolidated financial statements in a currency different from the one used in national legislation, those results must be translated into the domestic-law currency to determine whether, and how, the group falls within the minimum-tax rules in that jurisdiction. It adds that, although this translation can only be made at the end of the reporting year, uncertainty can be reduced if the methodology for converting the monetary thresholds is fixed in a way that gives certainty at the beginning of the relevant year. That tracks OECD paragraph 20.

Paragraph 8 lays down the threshold methodology. The relevant threshold amounts must be translated from the group’s presentation currency into the currency used in the implementing jurisdiction’s domestic law using the same average exchange rate for December of the calendar year preceding the start of the relevant reporting year. If the domestic threshold is expressed in euro, the ECB reference rates are used, with a fallback to the implementing jurisdiction’s central bank where the ECB does not quote the relevant local currency. If the domestic threshold is expressed in a non-euro currency, the implementing jurisdiction’s central-bank rate is used. That is a direct adoption of OECD paragraph 20.1.

Paragraph 9 is an operationally important part of the circular. Where the relevant provision refers back to prior reporting years, each prior year uses its own December average rate from the calendar year immediately preceding that earlier year. The circular’s own example, for a tested year of 2026, applies December 2021 to the 2022 threshold, December 2022 to the 2023 threshold, December 2023 to the 2024 threshold and December 2024 to the 2025 threshold. This is why the prior draft needed a technical correction: the circular’s footnote here points to OECD paragraph 19.2, and that is the paragraph that sets out this year-by-year historical-threshold approach.

Paragraph 10 of the circular accepts that this can produce counter-intuitive results, but says those results are acceptable because consistent application of the monetary thresholds across implementing jurisdictions is more important than intuitive FX symmetry in individual cases. The OECD says the same thing in paragraph 20.4 and illustrates the point with an example involving permanent differences and exchange-rate effects.

The practical consequence is that for Belgian Pillar Two purposes there are three separate FX exercises. First, the GloBE computation itself remains in the group’s presentation currency under the UPE accounting standard. Second, euro-denominated monetary thresholds are rebased using the prior-December-average methodology, with separate conversions for each historic year where the rule looks back. Third, the Belgian liability that is actually due under Articles 28, 31 or 35 is converted into euro at the ECB reference rate on the last day of the reporting year.