Pillar Two Global Readiness
A country-by-country assessment and a overview of what businesses must prepare for
The global tax environment is shifting again, and this time the pace leaves little room for prolonged analysis. Across jurisdictions, the arrival of Pillar Two has created a new baseline for what “minimum taxation” really means. The result is a world in which large multinational groups must understand not only the rules themselves, but also the ways different governments interpret, resist or reshape them.
In New Zealand, adoption has been direct and relatively uncomplicated. The GloBE rules are now part of domestic law for income years beginning on or after 1 January 2025, with obligations falling on multinational groups earning at least €750 million globally. New Zealand offers pragmatic guidance. That is to register early, assess any available safe harbours, calculate effective tax rates jurisdiction by jurisdiction and prepare to file GloBE Information Returns and Multinational Topup Tax Returns where needed. This gives MNEs a predictable pathway, even if it adds to compliance pressure. Creating a framework which is resilient and easily followed is essential, given the pace and complexity of new directives.
By contrast the UK has emphasised registration before everything else. HMRC has deliberately designed its implementation of the GloBE rules to centre on identifying all inscope groups early, before any calculation, reporting or topup tax assessment can occur.
They now require any inscope group, defined by the same €750 million global revenue threshold, and at least one UK entity, to register within six months of the end of its first accounting period beginning on or after 31 December 2023. There is no agent access, meaning MNEs must complete the process themselves through Government Gateway credentials. They must provide detailed information about the ultimate parent entity, filing member, accounting periods and jurisdictional footprint, whether or not any topup tax is ultimately payable. The UK is focusing on getting the enforcement systems in place before the actual tax rules start to apply. The rationale is because HMRC has made registration the foundation of its entire compliance and enforcement framework.
India’s focus has been accounting and disclosures. Through amendments to IAS 12, the IASB has clarified how companies must handle Pillar Two taxation in their financial statements. Entities cannot recognise deferred tax assets or liabilities related to Pillar Two at this stage, but they must disclose that they have applied this exception and provide clear information about their exposure once legislation has been enacted, even before topup tax becomes effective. These disclosure requirements apply to annual periods ending on or after 31 December 2023. This accountingfirst approach reflects India’s position in global tax reform: alignment with BEPS 2.0, but careful sequencing of implementation
Elsewhere, the emphasis has been on reconciling Pillar Two with existing domestic systems. Mexico and Germany have both spotlighted their own local reporting landscapes. Germany’s new public country-by-country reporting rules now require certain subsidiaries and branches of nonEU headquartered groups to publish CbCR information locally, with financial penalties for incorrect or late reporting, if the global group exceeds €750 million in revenue. This subtly shifts compliance weight from parent companies to intermediate entities, a trend that will intensify as jurisdictions continue embedding Pillar Two. bycountry reporting rules now require certain subsidiaries and branches of nonEU headquartered groups to
In contrast, the United States stands apart. Rather than adopting Pillar Two directly, it has pursued a SidebySide (SbS) model grounded in the One Big Beautiful Bill Act (OBBBA). Under the G7 political agreement, U.S.-parented groups would not be subject to the Income Inclusion Rule or Undertaxed Profits Rule (the cornerstone enforcement mechanisms of Pillar Two) provided the U.S. continues strengthening its own minimum tax framework. This carveout followed negotiations that led to the removal of Section 899, the proposed retaliatory measure targeting jurisdictions applying UTPRn (under tax profit rule) to U.S. groups. In essence, the U.S. is advancing a domestic alternative that resembles a minimum tax without fully submitting to the OECD’s architecture. bySide (SbS) model grounded in the One Big Beautiful Bill Act (OBBBA). Under the G7 political agreement, U.S.-parented groups would not be subject to the Income Inclusion Rule or Undertaxed Profits Ruleout followed negotiations that led to the removal of Section 899, the proposed retaliatory measure targeting jurisdictions applying UTPR.
This divergence creates a world of two systems living side by side. Most jurisdictions are implementing the GloBE rules as intended, including central registration, jurisdictional ETR (effective tax rate) calculations and globally coordinated topup taxes. The U.S. is building on a reworked set of international tax measures including the transformed GILTI (Global intangible low taxed income) and FDII (foreign derived low tax income) regimes that operate on similar principles but different mechanics. While this avoids exposing U.S. multinationals to foreign topup taxes, it also means global groups need to model tax outcomes under two different systems depending on their structure and footprint.
The supplychain impacts of this shift is multi-layered. Tariffs and transfer pricing are already shaping business behaviour, as recent Praxity sessions highlighted. With renewed IRS scrutiny and increased use of reciprocal tariffs, transfer pricing strategies now play a more visible role in managing both tax and operational risk. Companies may need to rethink how they characterise entities, review comparables and redesign intercompany flows to align tariff exposure with real economic activity. For some, that means moving more valueadded functions back into the United States or restructuring North American operations in light of USMCA’s upcoming 2026 joint review.
Taken together, Pillar Two readiness is no longer about understanding a single global standard. It is about preparing for variability. Multinationals must manage not only compliance and disclosure but also the deeper shifts in supplychain design, jurisdictional risk, reporting expectations and accounting transparency that follow in Pillar Two’s wake. The businesses that act early will find they have more room to manoeuvre as the global tax oversight increases, one jurisdiction at a time.
Pillar Two Global Readiness Checklist
1.
Determine whether you are in scope
- Confirm whether the group meets the €750 million global revenue threshold, which is the entry point for Pillar Two across New Zealand, the UK, Germany, India and all other adopting jurisdictions.
- Identify all constituent entities operating in jurisdictions that have enacted or substantively enacted Pillar Two legislation. This includes subsidiaries and branches of non EU parents in Germany that now carry Public CbCR obligations.
2.
Registration and administrative setup
- Check whether your first accounting period beginning on or after 31 December 2023 triggers mandatory UK Pillar Two registration and ensure someone inhouse (not an agent) can complete it through Government Gateway.
- For New Zealand, confirm whether you need to file a GloBE Information Return or a Multinational Topup Tax Return, depending on group structure and information exchange agreements.
- In Germany, determine whether the parent entity has published a Public CbCR in an official EU language; if not, ensure the relevant German entities can publish it locally to avoid fines of up to €250,000.
3.
Safe harbour assessment
- Review whether the group qualifies for any of the Pillar Two safe harbours, including transitional reliefs or simplified calculations. These vary by jurisdiction but can materially reduce nearterm compliance effort.
- If operating under the U.S. umbrella, understand that the SidebySide (SbS) system may exempt U.S.parented groups from IIR and UTPR under the G7 understanding, but this does not remove obligations for nonU.S. entities in the structure.
4.
ETR modelling across all jurisdictions
- Calculate the effective tax rate in every jurisdiction where the group operates. This determines exposure to topup tax under Pillar Two.
- Identify where the ETR sits below the 15% minimum and model the topup tax that would arise in each location.
- Include impacts from tariffs and supplychain structures that may depress profits and affect ETR calculations, as shown in the automotive and steel examples in your uploaded documents. chain structures that may depress profits and affect ETR calculations
5.
Evaluate supplychain and transfer pricing alignment
- Review the supply chain to determine whether functions, assets and risks are located in jurisdictions where profit levels make sense economically and under Pillar Two.
- Confirm that transfer pricing policies and intercompany agreements reflect current operational reality and tariffdriven adjustments. This includes assessing whether certain entities are correctly characterised as limitedrisk distributors, assemblers or fullrisk entities. Update your comparables analysis using the latest available financial and market data, particularly where tariffs are distorting margins. Quarterly data may be needed to reflect volatility.
6.
Understand jurisdiction specific reporting obligations
- For the UK, confirm whether registration includes both Domestic TopUp Tax (DTT) and Multinational Topup Tax (MTT) obligations, depending on whether the group is UK only or multinational. Up Tax (DTT) and Multinational Topup Tax (MTT) obligations, depending on whether the group is UKonly or multinational.
- For New Zealand entities, ensure readiness to deliver GIR and MTTR filings even where the group is headquartered elsewhere.
- In Germany, ensure Public CbCR reports are published locally when the nonEU parent does not fulfil the requirement.
7.
Prepare IAS 12 financial statement disclosures
- Apply the mandatory exception from recognising deferred tax assets or liabilities related to Pillar Two income taxes. This applies immediately and retrospectively.
- Disclose that the exception has been applied and provide information that helps users understand the group’s exposure to Pillar Two legislation at the reporting date. Prepare for additional disclosures once the topup tax becomes effective, even if quantitative estimates remain incomplete. Qualitative disclosure is acceptable when data cannot yet be reasonably estimated.
8.
Map the divergence between the U.S. and the rest of the world
- Identify which entities fall under the SbS model (primarily U.S.headed groups) and which fall under full OECD Pillar Two implementation.
- Model how the group's tax position changes depending on whether jurisdictions apply IIR, UTPR or QDMTT rules.
- Understand that despite political agreements, existing Pillar Two legislation in more than 50 jurisdictions still applies to nonU.S. entities until laws are formally updated.
9.
Ensure internal governance and crossfunctional readiness
- Align tax, finance, supplychain and legal teams around Pillar Two implementation timelines.
- Establish clear ownership for registration, data gathering, ETR modelling, financial reporting and crossborder pricing decisions.
- Review whether the upcoming USMCA 2026 joint review could affect supplychain design, tariffs and transferpricing assumptions
10.
Develop a forward plan and monitoring framework
- Track legislative developments, especially in jurisdictions considering transitional reliefs or delayed implementation.
- Monitor OECD, G7 and domestic updates affecting the relationship between the U.S. SbS model and global Pillar Two enforcement.
- Refresh calculations and disclosures annually as new data becomes available, especially where tariffs or geopolitical changes influence profitability.