Contents
General
The Spring Finance Bill 2023 (Finance (No. 2) Bill) was published yesterday (March 23, 2023), along with its Explanatory Notes. The Bill includes provisions to implement key aspects of the Pillar Two Global Minimum Tax for accounting periods beginning on or after 31 December 2023.
This follows the original draft legislation published on July 20, 2022.
The Undertaxed Profits/Payments Rule was not included in the Bill, however this is not unexpected as it was announced in the Autumn Statement that this will apply no earlier than accounting periods beginning on or after 31 December 2024.
The draft legislation is very comprehensive and, as expected, covers relevant aspects of the OECD Model Rules, Commentary and other Published Guidance.
In particular it, provides for an Income Inclusion Rule (named the Multinational Top-Up Tax) and a Domestic Top-Up Tax (which is likely to be a Qualified Domestic Minimum Top-Up Tax).
The UK Bill is the most comprehensive law we have seen to date to implement the Pillar Two Global Minimum Tax. It closely follows the OECD Model Rules and reflects the latest guidance, including aspects of the OECD Safe Harbours Guidance and the Administrative Guidance.
It is worth noting at the outset that Section 255 of the Bill specifically refers to the OECD Model GloBE Rules and Commentary (including the OECD Examples) and directly applies them in various aspects of the application of the Multinational Top-Up Tax.
In addition, it applies ‘any further commentaries or guidance published from time to time by the OECD that are relevant to the implementation of the Pillar Two model rules’.
This would, therefore, include the OECD Administrative Guidance that will itself be included in an updated version of the OECD Commentary.
Application
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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.
Jurisdictions that apply a territorial basis do not tax foreign source income. This raises some interesting issues in the application of the Pillar 2 rules.
On February 20, 2025, Gibraltar issued the Income Tax (Allowances, Deductions, and Exemptions) (Amendment) Rules 2025 to allow in-scope MNEs to just be taxed under the Global Minimum Tax Act, and not the Income Tax Act.
In this article we look at the interaction between deferred tax on bonus depreciation and the substance-based income exclusion on investments in tangible assets.
On February 15, 2025, Law 2025-127 of February 15, 2025 (the 2025 Finance Act) was published in the French Official Gazette. This includes a number of amendments to the Pillar 2 regime from December 31, 2024.
Foreign tax credits interact with the Pillar Two GloBE Rules in a number of ways. In this article we assess the key impact.
The Pillar Two rules don’t just apply to companies. They apply to ‘entities’. This means that the Pillar Two GloBE rules can apply to both trusts and foundations.
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