Once the top-up tax for the jurisdiction has been calculated, it is then allocated to the constituent entities in the jurisdiction that have net Pillar Two GloBE income (ie not entities that have Pillar Two GloBE losses) so that the charging provisions (ie the income inclusion rule or under-taxed payments rule) can correctly apply.
Note, that if all of the constituent entities in the jurisdiction are wholly owned and the UPE is applying an income inclusion rule, the allocation amongst constituent entities wouldn’t be required given the UPE would simply account for the top-up tax.
Article 5.2.4 of the OECD Model Rules provide that the allocation is based on each relevant constituent entity’s share of the total net Pillar Two GloBE income of the jurisdiction.
Example
In jurisdiction X:
Company A has net Pillar Two GloBE income of 5 million
Company B has net Pillar Two GloBE income of 10 million
Company C has net Pillar Two GloBE income of 20 million
Company D has a net Pillar Two GloBE loss of 5 million
Total jurisdictional top-up tax is 5 million. This is allocated as follows:
Company A = 5 million * 5/35 = 714,286
Company B = 5 million * 10/35 =1,428,571
Company C = 5 million * 20/35 =2,857,143
Company D = 0
In this article we look at some of the most significant issues to consider including the determination of when and how deals can bring groups within the scope of Pillar Two, specific considerations for private equity funds, differences in GloBE and domestic tax treatment and potential restrictions on post-acquisition transfers.
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.
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