Corporate Investments and Pillar Two
May 6, 2025
The Pillar Two GloBE treatment of corporate investments will depend to a large extent on the nature of the activities, the accounting treatment and the ownership interest.
Contents
General
On March 20, 2023, the German Federal Ministry of Finance published a consultation, including a draft law (the Minimum Taxation Directive Implementation Act), to implement the EU Global Minimum Tax Directive. The consultation is open for comments until April 21, 2023.
The draft legislation is very comprehensive and, as expected, covers all relevant aspects of the EU Global Minimum Tax Directive.
In particular, it provides for an Income Inclusion Rule (IIR) for financial years beginning after December 30, 2023 and the Under-Taxed Payments Rule (UTPR) for financial years beginning after December 30, 2024.
The draft legislation also includes a Qualifying Domestic Minimum Top-Up Tax (for financial years beginning after December 30, 2023) which reflects the latest design guidance in the OECD Administrative Guidance.
In addition, safe harbours, as reflected in the OECD Safe Harbour Guidance are also reflected in the draft legislation.
The structure of the legislation is:
Part 1: General Provisions/Definitions
Part 2: IIR/UTPR
Part 3: Determination of GloBE Income or Loss
Part 4: Determination of adjusted taxes
Part 5: Determination of the effective tax rate and the top-up tax
Part 6: Business restructuring and shareholding structures
Part 7: Special features of ultimate parent companies, distribution regimes and investment units
Part 8: Administration
Part 9: Special provisions for the transitional year, the transitional period and the initial phase
Part 10: Qualified domestic minimum top-up tax (QDMTT)
Part 11: Procedures and Penalties
This layout is pretty much identical to the EU Minimum Tax Directive, with the addition of two new chapters for the QDMTT and procedures and penalties.
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The Pillar Two GloBE treatment of corporate investments will depend to a large extent on the nature of the activities, the accounting treatment and the ownership interest.
On April 30, 2025, the Swiss Federal Council issued a proposal to amend the Minimum Tax Ordinance to provide for the OECD GIR provisions, as well as some other small amendments.
On March 31, 2025, Japan enacted Cabinet Order No. 121 of 2025 and Ministry of Finance Ordinance No. 19 of 2025 to provide further details on the application of Japan’s QDMTT from April 1, 2026.
In April 2025, the Hong Kong Government proposed a number of Committee Stage Amendments to the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024. This includes amendments for the January 2025 and June 2024 OECD Administrative Guidance.
South Korea’s amendment to the Enforcement Decree No. 35348 of February 28, 2025 and the Decree of the Ministry of Economy and Finance No. 1114 of March 21, 2025 provide for further aspects of the June 2024 OECD Administrative Guidance as well as additional top-up tax forms.
Updates to our ‘OECD Administrative Guidance: Domestic Implementation Matrix’ to reflect the latest April 2025 Pillar 2 updates for the UAE and Poland.
On April 7, 2025, the Polish Ministry of Finance released details for a draft bill to amend the Minimum Tax Act. The amendments are primarily to implement the June 2024 and January 2025 OECD Administrative Guidance.
On April 16, 2025, the Ministry of Finance issued Ministerial Decision No. (88) of 2025 to provide for the application of the OECD Administrative Guidance from January 1, 2025.
The UTPR exclusion for MNEs in their initial phase of international activity does not need to be included in a QDMTT, however, it can be included. In this article we look at the different jurisdictional approaches.
On January 15, 2025, the OECD issued Administrative Guidance that includes a list of jurisdictions that have transitional qualified status for the purposes of the income inclusion rule and domestic minimum tax (including the QDMTT Safe Harbour). This was subsequently updated on March 31, 2025.
On April 10, 2025, the Belgium Ministry of Finance issued the QDMTT Return. This is still considered as draft until published in the Official Gazette but is unlikely to now change as this follows a consultation of a previous draft of the QDMTT Return that lasted until November 8, 2024.
Om March 31, 2025, the Law to Partially Amend the Income Tax Act was published in the Official Gazette. This implements the UTPR and QDMTT from April 1, 2026.
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