This lesson introduces the Global Anti-Base Erosion (GloBE) Rules, the core mechanism of Pillar Two which establishes a jurisdictional 15% minimum effective tax rate for large multinational enterprise groups.

• The Global Minimum Tax Framework: The GloBE Rules provide a coordinated system of taxation intended to ensure multinational enterprise groups are subject to a global minimum tax rate of 15% in each of the jurisdictions where they operate. The rules represent a key part of the OECD/G20 Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy.

• Scope and Application: The GloBE rules apply to large MNE groups with consolidated annual group revenue of at least EUR 750 million. The rules result in “top-up” tax amounts to bring the overall tax on profits in each jurisdiction where a group operates up to a 15% minimum effective tax rate.

• The Three Interlocking Rules: The Pillar Two global minimum tax consists of three interlocking rules that work together to ensure the minimum tax is effectively applied:

  • Income Inclusion Rule (IIR): Acts as the primary rule which broadly allows a jurisdiction to apply a top-up tax on multinational parent entities located in that jurisdiction if the group’s effective tax rate in another jurisdiction is below 15%.

  • Undertaxed Profits Rule (UTPR): Acts as a backstop rule which allows a jurisdiction to apply a top-up tax on constituent entities located in that jurisdiction if the group’s effective tax rate in another jurisdiction is below 15% and where the profit is not brought into charge under an IIR.

  • Qualified Domestic Minimum Top-up Tax (QDMTT): Operates consistently with the GloBE Rules and provides a jurisdiction the ability to claim primary rights to impose top-up tax over any low-taxed profits in that jurisdiction, in priority over the IIR and UTPR.