BEPS 2.0 Pillar 2: Global minimum taxation

Following the OECD's Base Erosion and Profit Shifting (BEPS) initiative, the regulations on global minimum taxation (Pillar 2) that emerged from the follow-up project BEPS 2.0 have been implemented in the EU and many countries around the world. However, the implementation of measures to redistribute taxation rights (Pillar 1) is currently still open. 

At the end of 2021, the OECD countries agreed to introduce an internationally applicable minimum tax for companies with consolidated group revenues of €750 million or more.

Following the decision on the BEPS measures, countries have since been required to create a legal basis for this. A corresponding political agreement was reached in the EU in mid-December 2022 and will be implemented for financial years starting on 1 January 2024. Corresponding regulations are already in force in other countries or are about to be introduced. The global minimum taxation regulations require intensive preparation on the part of companies.

The safe harbour regulations that have been introduced, i.e. simplifications initially for a transitional period, may provide some relief, but companies should act now and create appropriate processes and structures to meet global compliance obligations and also to be prepared if the safe harbour rules are no longer effective.

Global minimum taxation requires companies with consolidated group revenues of €750 million or more to determine a so-called effective tax rate (ETR) for each country. If this rate is below 15 per cent, a "top-up tax" must be paid. The ETR may be below 15 per cent even if the tax rate in the respective country is above this threshold. Regardless of taxation, comprehensive documentation and declaration requirements must also be observed.

One challenge lies in data availability and procurement. Much of the data relevant to the new regulations is not recorded in other documentation such as country-by-country reporting or trade balance sheets. New processes and comprehensive adjustments to the information from group accounting are necessary in order to collect this data efficiently. All companies within a group must be taken into account. This can only be achieved through close international cooperation between the tax and accounting departments. Experience shows that globally active medium-sized companies in particular have some catching up to do in this area and first need to develop the necessary structures. Time is short, and implementation should be initiated immediately.

Global minimum taxation came into force in most EU countries and in many other countries (e.g. the United Kingdom, Switzerland, Turkey) in 2024. You can find continuously updated implementation status here. 

The first reporting obligation for German companies is to submit the so-called group parent company report. For companies with a financial year that coincides with the calendar year, this had to be submitted to the Federal Central Tax Office by 28 February 2025. For groups of companies with a different financial year, the group parent company report is due by 28 February 2026.

On the one hand, KPMG has developed a project approach that takes into account the company-specific tax, accounting and IT landscape. Unlike many tax projects, the efficient implementation of the requirements of Pillar 2 requires special accounting expertise (especially IFRS). At KPMG, we have the necessary expertise – relevant experts are always part of our project teams.

On the other hand, KPMG has developed a global, cloud-based solution for the necessary calculations and provision of the relevant data: KPMG BEPS 2.0 Automation Technology (KBAT). This enables us not only to calculate GloBE income/loss etc. according to the income inclusion rule (primary supplementary tax), but also to calculate the QDMTT (national supplementary tax) for individual countries. In addition, we classify business units and prepare scenario comparisons and comprehensive results analyses for our clients. We are already able to output the XML file that is expected to be used for submitting the minimum tax report. By embedding KBAT into the KPMG Digital Gateway platform, you have access to additional tools, such as comprehensive legal entity management and a smart questionnaire application developed for Pillar 2. In addition, our GenAI Assistant answers Pillar 2-specific questions in all languages of the world, significantly reducing the workload for your organisation.

In addition, our clients benefit from KPMG's global network of Pillar 2 experts when it comes to meeting their compliance obligations. By pooling our expertise and using a globally coordinated process, we provide our clients with efficient and reliable support in submitting the required declarations.