Under Article 5.5 of the OECD Model Rules, a constituent entity can make an annual election for a de minimis exclusion to apply so that there is no top-up tax for a fiscal year if:
• the average Pillar Two GloBE revenue of the jurisdiction for the current and the two preceding fiscal years is less than EUR 10 million; and
• the average net Pillar Two GloBE income or loss of the jurisdiction for the current and the two preceding fiscal years is a loss or is less than EUR 1 million.
In order for the de minimis rule to apply, all constituent entities in the jurisdiction are required to meet the requirements.
Where the de minimis exclusion applies, the MNE is not required to calculate adjusted covered taxes, the Pillar Two ETR or top-up tax for the jurisdiction.
Both the average Pillar Two GloBE income and revenue requirements are based on the same rules used to calculate the jurisdictional Pillar Two GloBE income.
Note that although the de minimis exclusion is calculated on a jurisdictional basis, minority-owned sub-groups are included for this purpose (unlike for standard jurisdictional blending purposes). Therefore, the average revenue and income of minority-owned subgroups are included. For more information on minority-owned subgroups, see Minority-Owned Entities
Under Article 5.5.2 of the OECD Model Rules, the de minimis exclusion is based on a three-year average for revenue and income, however, a year is excluded for the averaging calculation if:
• There are no constituent entities with a Pillar Two GloBE income or loss in the jurisdiction;
• There are no constituent entities in the jurisdiction; or
• The only constituent entities in the jurisdiction are dormant
If the fiscal years for the averaging calculation are different with some longer or shorter, a pro-rata calculation is made.
The first of the threshold tests for the de minimis exclusion uses Pillar Two GloBE revenue. This is not the same as Pillar Two GloBE income which is used for calculating the Pillar Two GloBE ETR.
Pillar Two GloBE revenue is defined in Article 10 of the OECD Model Rules, and is initially taken from the revenue for a constituent entity in preparing the consolidated financial accounts. As the de minimis exclusion is a jurisdictional election, the revenue of all constituent entities in the jurisdiction is added together (unless specifically excluded).
The financial accounting revenue figure is then adjusted for Pillar Two GloBE purposes based on adjustments that are used to calculate Pillar Two GloBE income. Not all of these adjustments would affect revenue as some would impact on the deductibility of expenses.
Key Pillar Two GloBE income adjustments that would impact on Pillar Two GloBE revenue for the purposes of the de minimis exclusion include:
• Income and gains excluded under the OECD’s version of a participation exemption (eg excluded dividends, capital gains)
• Excluded equity gains or losses
• Revaluation gains or losses
• Differences in exchange rate conversions between tax and accounting currencies
• Prior period changes
• The arms-length requirement for transactions between constituent entities in different jurisdictions
• Refundable tax credits where they are reflected in the current tax expense in the financial accounts
• Elections to exclude gains or losses from fair value accounting
• Elections to apply consolidated accounting treatment to constituent entities in the same jurisdiction
• Exclusions for international shipping and ancillary income
• Revenue allocated to a permanent establishment which is deducted from revenue of the main entity
• Tax transparent entities where income is allocated to members
If there is a requirement to recalculate the ETR for a previous year, this may (depending on the nature of the adjustment) impact on Pillar Two GloBE revenue or income for the previous year.
If a subsequent adjustment reduces Pillar Two GloBE revenue or income for a previous fiscal year below the relevant monetary threshold for the de minimis exclusion, this does not entitle the MNE to the de minimis exclusion.
However, if there is an increase in Pillar Two GloBE revenue or income for a previous fiscal year such that the de minimis thresholds are not met, there is a requirement to calculate the Pillar Two GloBE ETR and top-up tax for that relevant year.
The de minimis exclusion does not apply to stateless or investment constituent entities. As such their revenue and income are not included in the threshold tests for determining if the de minimis exclusion applies.
Under Article 5.5 of the OECD Model Rules, a constituent entity can make an annual election for a de minimis exclusion to apply so that there is no top-up tax for a fiscal year if:
• the average Pillar Two GloBE revenue of the jurisdiction for the current and the two preceding fiscal years is less than EUR 10 million; and
• the average net Pillar Two GloBE income or loss of the jurisdiction for the current and the two preceding fiscal years is a loss or is less than EUR 1 million.
Pillar Two GloBE revenue is defined in Article 10 of the OECD Model Rules, and is initially taken from the revenue for a constituent entity in preparing the consolidated financial accounts. As the de minimis exclusion is a jurisdictional election, the revenue of all constituent entities in the jurisdiction is added together (unless specifically excluded).
On March 21, 2025, the UK approved a list of jurisdictions that have qualified status for the purposes of the income inclusion rule and domestic minimum tax (including the QDMTT Safe Harbour).
On March 27, 2025, Law No. 22 of 2024 was published in Qatar’s Official Gazette. This implements the Pillar Two Income Inclusion Rule and a Domestic Minimum Top- Up Tax from January 1, 2025.
On March 27, 2025, Bulgaria’s 2025 State Budget Law (the ‘2025 Budget Law’) was published in the Official Gazette. This includes a number of changes to the Corporate Income Tax Law to amend the Global Minimum Tax provisions from January 1, 2024.
Insurance Investment Entities are subject to special treatment under the Pillar Two GloBE Rules. Read our analysis of the key provisions.
On March 20, 2025, the Swedish Ministry of Finance issued a draft law to amend the Global Minimum Tax Act. The draft law is open for consultation until May 26, 2025. The purpose of the draft law is to implement the provisions of the June 2024 OECD Administrative Guidance into domestic law.
On March 18, 2025, the government approved a draft bill on the amendment of Liechtenstein’s Global Minimum Tax Act (‘the bill’). The bill is intended to implement domestically the OECD provisions for the exchange of information in the GloBE Information Return (GIR) under the multilateral agreement between competent authorities on the exchange of GloBE information (GIR MCAA).
On March 6, 2025 a Decree of the Italian Ministry of Finance on Notification Requirements for Global Minimum Tax purposes was published in the Official Gazette. This provides more details on the double filing relief notification under Article 51(4) of Legislative Decree December 27, 2023, no. 209 (the Global Minimum Tax Law).
The Pillar Two Rules include specific provisions for tax transparent entities to avoid artificially low effective tax rates and significant top-up tax, particularly for tax transparent UPEs.
Centralized HR/payroll companies are frequently used by MNE groups but raise specific issues in relation to the Pillar Two GloBE Rules. In particular, the impact of using a centralized function and the nature of recharges could have an impact on the substance-based income exclusion of group entities.
This website is not affiliated with or related to the OECD. We provide independent insights and analysis on the OECD Two-Pillar Solution
© 2025 OECDPillars
All Rights Reserved
