Why Pillar Two compliance demands focus as major filing deadline looms

OECD BEPS Pillar Two global minimum tax compliance continues to unfold against a backdrop of significant complexity and uncertainty as the first major filing deadline fast approaches. Successful completion of the first-year compliance requirement for Pillar Two requires an agile operating model that can adapt to ongoing changes and challenges ahead of (and following) the first filing milestone.

The OECD/G20 Inclusive Framework released the Global Anti-Base Erosion (GloBE) Model Rules in December 2021. Approximately 60 jurisdictions have enacted global minimum tax rules based on the GloBE Model Rules. Thirty-seven of those jurisdictions have global minimum tax rules effective beginning in tax year 2024, with 30 June 2026 as the first major compliance deadline.

Ongoing implementation of global minimum tax rules and reporting requirements

With the 30 June 2026 filing deadline looming, jurisdictions continue to adopt OECD technical and administrative guidance on the interpretation and compliance requirements of local rules. Procedurally, when the OECD publishes Pillar Two guidance, most enacting jurisdictions require new legislation to adopt the guidance, resulting in staggered and varied enactment of the OECD rules globally. MNEs must maintain a comprehensive understanding of their legal structure and locally enacted global minimum tax rules to ensure appropriate application of relevant enacted rules, complicating MNEs’ compliance with the rules in each relevant jurisdiction. Given persisting technical and administrative uncertainties, MNEs must make their best efforts to interpret enacted laws to complete timely required 2024 global minimum tax filings.

Perhaps most concerning to MNEs and practitioners is the absence of clear filing requirements (i.e., forms and filing procedures) in many jurisdictions. While the OECD framework for global minimum tax compliance provides a useful reference, local rules dictate the details of each filing, including specific data requirements and filing procedures that may involve manual data input into a government online portal or upload of a mandatory XML file.

Additionally, MNEs must continue to monitor and comply with new and ongoing Pillar Two notification and registration requirements, and, as necessary, make Pillar Two estimated tax payments.

The tax function often leads Pillar Two compliance and reporting, but the finance function is responsible for much of the underlying data. A cross-functional approach can facilitate the integrated flow of data, enable consistent application of controls, and ensure compliance is not siloed within the tax function. Governance is critical to sustained success. Effective operating models include strong oversight, internal controls, and audit readiness. Without robust governance, companies risk inaccuracies, delays, or reputational damage.

IT departments may need to adapt systems or integrate new vendor technology to enable tax provision and compliance calculations and reporting. Traditional tax compliance and reporting tools are not designed for the Pillar Two global minimum tax framework; calculating effective tax rates based on Pillar Two rules across multiple entities within a jurisdiction requires new capabilities. Companies face a choice: build in-house solutions, implement vendor platforms, or work with advisors who can provide technology-enabled services. The decision will depend on the business's size, complexity and existing systems.

Other factors in designing an effective operating model include flexibility and scalability. As Pillar Two rules and requirements evolve, companies must be able to update calculations, manage data at scale and adapt quickly. Technology investment is not merely about automation; it is about resilience in the face of both global and jurisdictional changes. Additionally, technology alone is not a solution. The value of technology investment is realized and sustained only when it is integrated properly with data, people and processes.

Companies facing Pillar Two compliance should expect continued change and respond with flexible, scalable operating models supported by strong governance and the right technology. With these strategies in place, businesses can manage global minimum tax complexity while reducing compliance risk in a rapidly changing tax environment.