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.
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.
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.
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