1. Non-Consolidation
1.1 Overview of Accounting Treatment
1.2 Pillar Two – Non-Consolidated JVs
1.3 How the Pillar Two Rules Apply to JVs
2. Consolidated JVs
2.1 General Rule
2.2 Top-Up Tax
For accounting purposes, the key criterion is whether there is significant influence.
For instance, under IAS 28, it is presumed that if an investor controls 20%-50% of the voting rights of the JV that there is significant influence, but there can be cases where significant influence can apply even below this threshold (eg significant transactions between the entities or participation in board meetings etc).
Under accounting rules such entities are usually classed as ‘associates’.
Where there is significant influence, the interest in the JV is accounted for under the equity method and the results are not consolidated.
Essentially the initial investment is recorded at cost and then adjusted for the actual performance of the JV.
Note that there is still an impact on the consolidated accounts.
In the consolidated statement of profit or loss, dividend income received from the JV is replaced by bringing in one line that shows the parent’s share of the JV results immediately before the consolidated profit before tax.
If by contrast, the investor controlled the investee then the results of the investee would be consolidated on a line-by-line basis in the consolidated financial statements.
For Pillar Two purposes under the general rules, an MNE group’s share of the income of a JV that it did not control would not be brought into account as the JV is not consolidated on a line-by-line basis as is required by Article 1.2 of the OECD Model Rules.
Therefore, there is a separate rule for JVs.
Article 10 of the OECD Model Rules define a JV as an entity whose financial results are reported under the equity method in the Consolidated Financial Statements of the MNE Group provided that the UPE holds directly or indirectly at least 50% of its ownership interests.
Therefore, an associate that was accounted for under the equity method and where the UPE held less than 50% of the ownership interest would not be subject to the special JV rule.
For example, in a limited partnership, limited partners are not considered controlling if the general partner controls the investment, even if a limited partner owns a large share of the investment. For GloBE purposes, the income and tax items attributable to these would be excluded from the ETR calculation.
In addition, an excluded entity or a JV that is the UPE of an MNE group already within the Pillar Two rules are not classed as JVs for this purpose.
1. The JV and any of its subsidiaries are treated as a separate MNE group for Pillar Two purposes, and the JV is treated as the UPE, under Article 6.4.1(a) of the OECD Model Rules.
This means that for the purposes of jurisdictional blending the JV group income and covered tax is not included with other entities in the jurisdiction.
2. The JV itself does not apply the income inclusion rule or the under-taxed payments rule, under Article 6.4.1(b) of the OECD Model Rules.
The standard rules apply and the UPE or other parent entity would apply an IIR.
3. The UPE or parent entity is subject to top-up tax on its allocable share of the JV group under Article 6.4.1(c) of the OECD Model Rules.
This takes into account both direct and indirect holdings.
4. Where the allocable share is not fully accounted for under an IIR then any amount remaining is added to the total under-taxed payments rule amount, and then allocated to other constituent entities under the general rules.
If the interest in the investee is consolidated due to the investor exercising control, then the first step is that the general rules apply.
The Pillar Two rules use the consolidated financial statements and therefore the income and tax of the JV would be brought within the scope of the Pillar Two rules anyway.
Providing the UPE holds more than 30% in the JV the results are included along with other group entities for the purposes of jurisdictional blending.
If the UPE holds less than 30%, the JV is treated as a minority-owned entity and is a separate entity (or sub-group) for the ETR calculation.
Note that the imposition of top-up tax where a JV is consolidated can vary depending on the interest that the UPE holds in the JV.
If the UPE holds more than an 80% interest in the JV, the standard rules apply and the UPE of the group would account for top-up tax under an IIR (or other parent entity if the UPE did not apply an IIR).
If the UPE held less than an 80% interest in the JV the treatment depends on the group structure.
If the JV is a single entity held by the JV then the UPE would just apply an IIR.
However, if there was another parent entity, that would be classed as a partially owned parent entity (POPE).
The POPE then accounts for top-up tax in respect of its subsidiaries. The following examples illustrate this:
If Sub 1 was a low-taxed entity with top-up tax calculated at 1 million euros, the UPE would apply an IIR to its allocable share (85%). Therefore, it would account for top-up tax of 850,000 euros and the remaining 150,000 euros would be uncollected.
If, however, the group structure was:
The Parent Co would be a POPE as more than 20% of its ownership interest was held by non-group entities. As such, Parent Co would account for the 1 million euros top-up tax. The UPE would then reduce any top-up tax by the 1 million euros that the POPE accounted for.
The treatment of joint ventures (JVs) under the Pillar Two rules depends on whether the interest in the JV is consolidated on a line-by-line basis in the consolidated accounts. If it is, the general rules apply. If not, special rules apply to treat the JV separately from other jurisdictional entities.
Joint Ventures (JVs) that aren’t consolidated are treated as follows:
1. The JV and any of its subsidiaries are treated as a separate MNE group for Pillar Two purposes, and the JV is treated as the UPE, under Article 6.4.1(a) of the OECD Model Rules.
This means that for the purposes of jurisdictional blending the JV group income and covered tax is not included with other entities in the jurisdiction.
2. The JV itself does not apply the income inclusion rule or the under-taxed payments rule, under Article 6.4.1(b) of the OECD Model Rules.
The standard rules apply and the UPE or other parent entity would apply an IIR.
3. The UPE or parent entity is subject to top-up tax on its allocable share of the JV group under Article 6.4.1(c) of the OECD Model Rules.
This takes into account both direct and indirect holdings.
A Communique of October 29, 2025 issued by the MRA provides further information on QDMTT Notifications.
On November 3, 2025, Kenya issued the Draft Income Tax (Minimum Top Up Tax) Regulations, 2025 to provide for the detailed application of the Pillar 2 domestic minimum tax.
On October 16, 2025, Ireland published its 2025 Finance Bill. This includes amendments for the January 2025 OECD Administrative Guidance, DAC 9 implementation as well as other technical amendments.
On October 28, 2025, Government Notice No. 6763 was issued which extended some of the Pillar 2 filing and notification deadlines.
On October 29, 2025, Order HAC/1198/2025, of October 21 was published in the Official Gazette. This approves the final versions of three specific Pillar 2 forms – Form 240 (registration), Form 241 (the GIR) and Form 242 (the top-up tax return).
On October 21, 2025, Slovakia’s Parliament approved a law to amend its minimum tax act to provide for the June 2024 and January 2025 OECD Administrative Guidance, as well as EU Directive DAC 9 amendments.
On October 21, 2025, Vietnam released Decision 3563/QD-BTC 2025 on the Administrative Procedures for the Minimum Tax. This includes the final forms to be submitted for notification, registration and returns.
Guernsey has issued the Guernsey Pillar 2 Brief: Issue 1 which includes further detail on the registration process (the actual registration system is planned to be operational during the fourth quarter of 2025).
On October 14, 2025, France released the 2026 Finance Bill. This includes amendments to include the June 2024 OECD Administrative Guidance, as well as DAC 9 implementation.
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