Haslers International | OECD Pillar 2

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Your multinational organisation may be impacted by the newly introduced rules related to the OECD’s Pillar 2.  The OECD Pillar 2 rules have been put in place to ensure that large multinational groups pay a minimum level of tax on the profits arising in each jurisdiction in which they operate. Where an entity’s effective rate of tax in any jurisdiction is below the minimum 15% rate, the ultimate parent entity is primarily liable for a ‘top-up tax’ to bring the rate up to 15%.

If the following conditions are met, your group will be subject to UK tax regulations:

1. The group’s total revenue exceeds €750 million in at least two of the past four fiscal years
   
2. At least one entity exists in the UK.

If your organisation meets the above requirements, we must then consider the two Pillar 2 top up taxes in the UK, which are Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT).

UK Compliance Responsibilities

Your organisation must register within six months after the end of the first accounting period that commenced after 31 December 2023.

Companies must register with HMRC (UK tax authority) by March 31, 2026. Unless otherwise specified, the registering entity should be the ultimate parent company.

Multinational clients that may be affected should confirm with their advisers whether the registering entity with HMRC will be the ultimate parent company, or if they should register your UK local entity instead.

Broadly, the compliance requirements are as follows:

• One-time registration with HM Revenue & Customs (“HMRC”)
• Submitting an information return or an overseas return notification to HMRC
• Completing a self-assessment return for HMRC and making any necessary elections (including transitional safe harbour elections*).

Safe Harbour Rules

Under the OECD Pillar Two framework, transitional safe harbour rules allow multinational groups to simplify compliance during the initial years of implementation.

If a jurisdiction meets certain low-risk criteria, such as having an effective tax rate above a set threshold, minimal revenue and profit, or only routine profits, then groups can avoid full top-up tax calculations for that jurisdiction.

These rules reduce administrative burden and provide penalty relief, helping businesses ease into the new global minimum tax regime.

A group must make an election for the safe harbour to apply for a territory in an accounting period. This election is made annually on the Globe Information Return.

The Globe Information Return is the annual Return you are required to complete if you are subject to the Pillar 2 rules.

A group has 18 months to submit the Globe Information Return for the first accounting period it’s subject to Pillar 2 taxes. Therefore, the deadline for the first Globe Information Return is 31 March 2027.

If you would like our assistance reviewing if the safe harbour rules apply, we can provide you with our fee quote once we’ve received the relevant information.