Pillar Two Global Minimum Tax Planning

Pillar Two Global Minimum Tax Compliance

Pillar Two, commonly referred to as the “global minimum tax” or “GloBE,” establishes minimum tax rules to ensure large multinational enterprises (MNEs) pay a minimum effective tax rate of at least 15%, calculated based on a specific rule set. More than 140 countries have agreed to enact Pillar Two tax reform, which comprise the majority of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

The Pillar Two model rules will have a far-reaching effect on the taxation of MNEs, especially those with an effective tax rate below the minimum in any jurisdiction, which would be required to pay a top-up tax to their corporate headquarters location.

The tax would be applied to groups with revenue of at least €750 million (currently roughly $800 million) per year. In addition to the obligation to pay a top-up tax under Pillar Two, failure to comply with the filing requirements within 15 months after the fiscal year end of each constituent entity results in a penalty equal to 5% of revenue for the entity that does not meet the filing requirements.

Please view our Pillar Two Q&A to learn more about the global minimum tax requirements, implementation, and – in some cases – hidden benefits of Pillar Two regulatory requirements.

Connect with the Pillar Two Team

CBIZ Pillar Two Assessment Services
Pillar Two Calculation Tool

Our team of international tax practitioners will help assess the likely impact of Pillar Two on your organization. Following a six-step process, we will:

Conduct initial assessment to identify the MNE groups, including the filing and parent entities
Remove any excluded entities
Determine GloBE income, ETR and estimated top-up tax for MNE groups
Identify permanent establishments
Determine de minimis threshold
Implement elections (GloBE Pillar Two Safe Harbor Election checklist)

CBIZ has developed proprietary software that precisely calculates an MNE’s effective global minimum tax rate and top-up tax liability for each of their jurisdictions. The initial automated calculation tool takes a sample dataset of underlying information and provides the following:

GloBE income or loss
Adjusted covered taxes
Effective tax rate
Substance-based income exclusions (carve-outs)
Top-up tax rate
Top-up amount

This calculation engine can be used regardless of the entity type and the number of jurisdictions the MNE has.

Pillar Two Next Steps

CBIZ tax professionals suggest you begin the Pillar Two process with an assessment. Our team will work with you and your team to:

Identify the applicability of Pillar Two to your organization
Use the CBIZ calculation tool to conduct a high-level assessment of your jurisdictions’ effective tax rate
Identify where data gaps exist
Propose actionable next steps, including correcting Pillar Two data gaps and designing a tax-optimized legal and transfer pricing structure.

Learn how our international tax services team can support your organization regarding Pillar Two Global Minimum Tax planning and compliance. Connect with our team today.

March 18, 2024Summary of Fiscal Year 2025 Green Book Tax Proposals

The Green Book, a document detailing the president’s revenue proposals, encompasses various areas of tax policy that the Biden Administration believes will create a more equitable and efficient tax system overall. Remember that the Green Book represents the president’s “wish list” for tax policy, while Congress must draft and pass any associated legislation.

Don Reiser

Managing Director

[email protected]

212-790-5724

Jan Smallenbroek

Managing Director

[email protected]

401-330-3048