Updated Pillar Two FAQ Clarifies Compliance Obligations

On 18 June 2026, the Luxembourg tax authorities provided important clarifications regarding Pillar Two filing obligations by updating their Frequently Asked Questions ("FAQ"). These FAQs are particularly relevant for groups in scope of the Law of 22 December 2023 on Global Minimum Taxation (the "Pillar Two Law") who face their first filing obligations in respect of FY 2024, with deadlines arising as early as 30 June 2026.

The updated FAQ provides clarifications on registration obligations (Article 49 of the Pillar Two Law), GIR notifications (Article 50(3) of the Pillar Two Law), and Local Top-up Tax Returns (the "Local Return") (Article 51 of the Pillar Two Law).

Background:

All Constituent Entities (“CE”), Joint Ventures (“JV”), and Joint Venture Subsidiaries (“JV Subsidiaries”) that are located in Luxembourg are required to register with the Luxembourg tax authorities within 15 months after year-end (or 18 months for the transition year), irrespective of whether a safe harbour election has been made and, more generally, irrespective of any GIR or Local Return filing obligations.

Clarifications in the FAQ:

• Investment entities are generally required to register. The same applies for compartments of funds that qualify as CE, JV, or JV Subsidiary. In the absence of a tax identification number, a request may be made to the Luxembourg tax authorities either by telephone (+352 247-52461) or by email: gir@co.etat.lu.
• CEs, JVs, and JV Subsidiaries qualifying as stateless under the Pillar Two Law do not have a registration requirement.
• A CE, JV, or JV Subsidiary that is created and dissolved within the same fiscal year must register and deregister for Pillar Two purposes. Where the fiscal year corresponds to the Transition Year, the registration deadline is 18 months after year-end. Although the statutory deregistration deadline is 15 months after year-end, the Luxembourg tax authorities will also accept deregistration filings submitted within 18 months after year-end if the entity is dissolved during the Transition Year.
• If a CE changes its MNE Group during a fiscal year, a deregistration and new registration will be required.

Background:

The FAQ provides several examples where a Local Return may or may not be required. The form, which covers top-up taxes under the Qualified Domestic Minimum Top-up Tax (“QDMTT”), the Income Inclusion Rule (“IIR”), and the Undertaxed Profits Rule (“UTPR”), was published on 6 January 2026 (for more information please refer to our Luxembourg Tax Alert).

Top-up taxes under the IIR

According to Article 51(1) of the Pillar Two Law, any Luxembourg parent entity that is part of an MNE group or a large-scale domestic group and is subject to IIR tax is required to file a Local Return.

Key clarifications from the FAQ include:

• Investment entities are only subject to the filing requirement if they are an ultimate parent entity (“UPE”) and are not an Excluded Entity.
• A Local Return is required where a Luxembourg UPE is subject to the IIR because it holds a low-taxed CE in a low-tax jurisdiction where no QDMTT applies, even if no top-up tax is ultimately payable (e.g., because the substance-based income exclusion reduces the top-up tax to zero).
• No Local Return is required where the Luxembourg UPE is not subject to the IIR, including where:
  • no CE is low-taxed; or
  • the Transitional CbCR Safe Harbour applies.

Top-up taxes under the UTPR

According to Article 51(2) of the Pillar Two Law, a designated filing entity that has been allocated the UTPR top-up tax is required to file the Local Return. In the absence of a designated filing entity, the filing obligation falls on the CE to which the UTPR top-up tax has been allocated.

Key highlights of the FAQ include:

• Where a designated filing entity for UTPR has been appointed in Luxembourg, only that entity is required to file the Local Return if UTPR is allocated to it under Article 46.
• Where no designated filing entity for UTPR has been appointed in Luxembourg, each Luxembourg CE to which UTPR is allocated under Article 46 (including an allocation of zero) is required to file a Local Return.
• A Local Return is not required where no UTPR amount is allocated under Article 46 (no top-up tax is due under the UTPR), including where:
  • the Luxembourg CEs are not subject to the UTPR (e.g., because the UPE is located in a jurisdiction applying a Qualified IIR);
  • the Luxembourg CE is an investment entity excluded from the UTPR;
  • no UTPR amount is determined (e.g., because there is no excess profit after the substance-based income exclusion); or
  • the Transitional CbCR Safe Harbour applies.

Top-up taxes under the QDMTT

According to Article 51(3) and (4) of the Pillar Two Law, a designated filing entity that has been allocated the QDMTT top-up tax is required to file the Local Return. In the absence of a designated filing entity, the filing obligation falls on the CE, JV or JV Subsidiary to which the QDMTT top-up tax has been allocated.

Key highlights of the FAQ include:

• Where a designated filing entity for QDMTT has been appointed in Luxembourg, only that entity is required to file the Local Return if QDMTT is allocated to it under Article 47.
• Where no designated filing entity has been appointed, each Luxembourg CE, JV, or JV Subsidiary to which QDMTT is allocated under Article 47 is required to file a Local Return.
• A Local Return is not required where no QDMTT is due or where no QDMTT is allocated to the Luxembourg CE, JV, or JV Subsidiary under Article 47, including where:
  • no Luxembourg CE, JV, or JV Subsidiary is low-taxed;
  • all Luxembourg CE, JV, or JV Subsidiaries are investment entities;
  • no QDMTT is determined (e.g., because there is no excess profit after the substance-based income exclusion); or
  • the Transitional CbCR Safe Harbour applies.