South Korea to Apply a QDMTT from January 1, 2026
August 6, 2025
South Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.
Article 10 of the OECD Model Rules defines an entity as either:
– a legal person (except an individual); or
– any arrangement that prepares separate financial accounts.
Note that the First Set of OECD Administrative Guidance also excludes government agencies (both central and local government) that carry out government functions.
The first limb above would generally catch foundations, whilst the second would catch trusts.
This means that trusts and foundations are squarely within the Pillar Two rules and could be a low-taxed entity, an intermediate entity/partially owned parent entity or even an ultimate parent entity (UPE).
Under Article 1.4.1 of the OECD Model Rules, a UPE for the Pillar Two rules is:
Whether a trust is a UPE is an important consideration as (1) in many cases the UPE is required to apply the income inclusion rule to account for top-up tax and (2) the definition of an MNE group hinges on the relationship between the group companies and the UPE.
For instance, take this scenario:
Determining if the trust was the UPE could result in all companies then potentially being within the scope of the Pillar Two rules (subject to any specific exclusions etc). Aside from the application of Pillar Two to the group, the trust could then be liable to account for top-up tax.
This in itself could create issues.
The definition of a group in the Pillar Two rules relies on accounting principles so that there is a group if there is a requirement to prepare consolidated financial statements.
Whilst a trust or foundation may not usually have to prepare consolidated financial statements under an accounting standard, the Pillar Two rules go further.
Article 10 of the OECD Model Rules states that if no consolidated financial statements are prepared a deeming provision applies so that the entity must prepare hypothetical consolidated financial statements as if it was required to prepare them in accordance with an Authorised Financial Accounting Standard that is either an Acceptable Financial Accounting Standard or another financial accounting standard.
As such, a trust or foundation would need to determine if it would be required to prepare accounting standards under an accounting standard.
This would again depend on accounting principles.
Under IFRS for instance, there is a requirement to consolidate if the trust or foundation possesses power over the parent entities, has exposure to variable returns from its involvement with them and has the ability to use its power over them to affect its returns.
South Koreas 2025 Tax Reform Proposal (announced on July 31, 2025), provides that a QDMTT will be applied from January 1, 2026.
On July 24, 2025, the Luxembourg Government issued:
– a draft law to amend its Minimum Tax Law to provide for the January 2025 OECD Administrative Guidance and the EU DAC 9 GIR filing requirements: and
– a draft Regulation which includes the format of the GIR
On July 16, 2025, Kuwait updated its electronic registration portal to include Pillar 2 registration for in-scope groups.
The Pillar Two effective tax rate (ETR) calculation for investment entities is similar to the standard ETR calculation, however, there is an important twist in that the top-up tax is adjusted for minority interests. There is no adjustment for minority interests under the standard ETR calculation. In this article we look at the impact of this.
Foreign tax credits interact with the Pillar Two GloBE Rules in a number of ways. In this article we assess the key impact.
In most cases, a Qualifying Refundable Tax Credit will result in a higher Pillar Two effective tax rate than a non-qualifying tax credit. However, this is not always the case. We look at some examples in this article.
On July 9, 2025, ANAF Order 1.729/2025 was issued to nominate a single designated entity for QDMTT filing and payment purposes, if there are several constituent entities in Romania that are part of the same group.
On June 30, 2025, Japan issued its updated GloBE Information Return (GIR) to reflect the OECD GIR changes in January 2025.
The Executive Regulations were issued on June 29, 2025, in Ministerial Resolution No. 55 of 2025. The Regulations provide for the detailed rules for the application of the domestic minimum top-up tax from January 1, 2025.
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