In depth - OECD Pillar Two: Time to act on the global minimum tax

At a glance

The Pillar Two global minimum tax is here. Japan and South Korea have enacted domestic Pillar Two legislation, and many other countries, including the UK, Switzerland, Ireland and Germany, have released draft legislation or publicly announced their plans to introduce legislation based on the OECD Model Rules.

Many aspects of Pillar Two will be effective for tax years beginning in January 2024, with certain remaining impacts to be effective in 2025. While each country must enact its own legislation to apply the Pillar Two rules, there is much for multinational businesses to do to prepare for compliance with these rules.

In the US, legislation to enact Pillar Two is unlikely in the near term. But regardless of what the US does (or does not do), US companies with operations in countries that have enacted Pillar Two (1) will be subject to its requirements, including the reporting requirements and, perhaps more importantly (2) they will be at risk of double taxation.

Given the anticipated impact on interim and annual financial reporting in calendar year 2024, as well as future impacts on cash taxes and compliance requirements, companies are encouraged to act now.