KPMG report: Updated analysis of Pillar Two model rules for 15% global minimum tax following release of commentary

KPMG’s updated analysis of the Pillar Two model rules following release of commentary

KPMG’s updated analysis of the Pillar Two model rules following release of commentary

The Organisation for Economic Cooperation and Development (OECD) on 14 March 2022 published commentary on the Pillar Two model rules released 20 December 2021. The model rules provide a precise template for governments to move forward with Pillar Two of the two-pillar solution to address the tax challenges arising from digitalisation and globalisation of the economy.

In addition to the 228 pages of commentary, the OECD released a 49-page document [PDF 1.9 MB] containing 24 examples to supplement the commentary. 

The model rules, along with the commentary and the examples, define the scope and set out the mechanism for the “global anti-base erosion” (GloBE) rules under Pillar Two, which will introduce a global minimum corporate tax rate set at 15% for multinational enterprises with annual revenue of at least €750 million, effective from 2023. Read TaxNewsFlash

Alongside the release of the commentary, the OECD opened a public consultation on the administrative and compliance aspects of the GloBE rules, including the potential terms of any simplifications and the use of safe harbors. Written comments are due no later than 11 April 2022.

A follow-on public consultation meeting is scheduled for the end of April 2022.


The adoption of the new rules is based on a “common approach,” which means that jurisdictions are not required to adopt the rules, but if they choose to do so, they will implement the rules consistently with the model.  

The rules are due to be brought into law in each participating jurisdiction through domestic law changes in 2022, to be effective in 2023 for the “income inclusion rule” (IIR), and in 2024 for the “undertaxed payment rule” (UTPR), which is a backstop to the IIR.

There is also the potential for local jurisdictions to introduce a qualifying domestic minimum top-up tax to tax entities in their jurisdiction, which could reduce or eliminate the amount of top-up taxes paid under the IIR or UTPR.

This timetable is ambitious. Notably, the latest proposed EU directive extended the deadline for transposition of the GloBE rules to 31 December 2023, with the IIR coming into effect for fiscal years beginning from 31 December 2023 and the UTPR for fiscal years beginning from 31 December 2024—thus, effectively a one-year delay. 

As part of its proposed “Build Back Better Act,” the Biden Administration proposed modifications to the “global intangible low-taxed income” (GILTI) rules that would shift from their current approach of global blending to more closely align with the Pillar Two approach of blending on a jurisdiction-by-jurisdiction basis. It remains far from clear whether the U.S. Congress will pass any new tax legislation in the coming year, and if so whether changes to the GILTI rules to align with Pillar Two would be included.    

The OECD also has yet to provide the details of the “subject to tax rule” (STTR) that is part of the agreement under Pillar Two and a key priority for developing nations.  

Read KPMG’s updated analysis of the Pillar Two model rules following release of the commentary and examples: KPMG report: Update on Pillar Two following commentary release [PDF 474 KB]


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