OECD Pillar 2 introduces a global minimum effective tax rate of 15% for very large business groups, but understanding whether the rules apply to your organisation isn’t always straightforward.
If your group operates internationally, or even primarily in the UK, new reporting and tax obligations may apply depending on your structure, consolidated global revenue, and jurisdictional tax position.
Understanding whether you are in scope, what your obligations are, and how Pillar 2 interacts with your existing structure is now an essential part of managing tax risk and governance.
In this guide, Cooper Parry’s Tax team explains who Pillar 2 applies to, how the €750m threshold works, and what affected businesses should be considering now.
WHAT IS OECD PILLAR 2?
Pillar 2 forms part of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Its purpose is to ensure that large multinational enterprise (MNE) groups pay a minimum level of tax in every jurisdiction in which they operate, regardless of where profits are booked.
At the heart of Pillar 2 are the Global Anti‑Base Erosion (GloBE) rules, which introduce:
- A 15% minimum effective tax rate
- A jurisdictional calculation of taxable profits and covered taxes
- Multiple mechanisms to charge a top‑up tax where the minimum rate is not met
If a group’s effective tax rate in a particular country falls below 15%, a top‑up tax can be applied elsewhere within the group to bring the overall tax paid on those profits up to the minimum level.
WHO DOES PILLAR 2 APPLY TO?
The €750m revenue threshold
Pillar 2 applies to very large groups with consolidated annual revenues of €750 million or more in at least two of the previous four accounting periods.
This threshold aligns with existing Country‑by‑Country Reporting (CbCR) rules and captures only the largest groups globally.
Multinationals and large domestic groups
Although Pillar 2 is often discussed in a multinational context, many countries – including the UK – have introduced domestic minimum top‑up taxes. This means that large domestic groups and UK‑headed groups can also be affected if profits are taxed below the minimum rate locally.
Groups most likely to be impacted by Pillar 2
Pillar 2 can affect a wide range of structures, including groups that:
- Operate in low‑tax or preferential tax regimes
- Benefit from IP boxes, tax holidays or certain incentive regimes
- Have complex financing or holding structures
- Are undertaking M&A activity or international expansion
Importantly, even groups that expect their effective tax rate to remain above 15% still need to assess their position and meet reporting obligations.
This breadth means Pillar 2 could impact Privately Owned, PE-Backed, VC-Backed and AIM-listed businesses in the UK and overseas. UK subsidiaries of overseas companies may also be in scope.
WHEN DO THE PILLAR 2 RULES APPLY?
Many jurisdictions, including the UK, have implemented Pillar 2 rules for accounting periods beginning on or after 31 December 2023, with further elements such as the Undertaxed Profits Rule applying from later periods.
This means that for many groups, Pillar 2 is already live, and first filings and payments are approaching or underway.
NEED SUPPORT UNDERSTANDING YOUR PILLAR 2 POSITION?
Determining whether your business is in scope is the first step. For many large groups, assessing revenue thresholds, jurisdictional exposure and reporting requirements can be complex – particularly where structures span multiple territories.
If you already know Pillar 2 may apply, our specialist team can support with compliance readiness, calculations and ongoing reporting. Explore our Pillar 2 tax compliance services here.
