In a global environment characterized by capital mobility, business digitization, and differences in effective tax rates between countries, the Organization for Economic Cooperation and Development (OECD) has promoted one of the most significant reforms in international taxation: Pillar Two of the BEPS (Base Erosion and Profit Shifting) project.
This framework introduces a global minimum tax of 15% with the aim of ensuring that multinational companies pay a fair amount of tax where they actually generate value, reducing the incentives to shift profits to low- or no-tax jurisdictions.
Pillar Two represents a structural change in international taxation and has direct implications for transfer pricing policies, tax planning, and corporate tax governance.
Rationale and objectives of Pillar Two
Pillar Two is part of the OECD/G20 Inclusive Framework on BEPS, which brings together more than 140 jurisdictions committed to implementing a fairer and more transparent tax system.
Its main purpose is to establish a minimum level of global taxation for multinational groups with consolidated revenues exceeding €750 million, preventing differences between tax systems from allowing the erosion of tax bases.
According to the OECD, the Pillar Two rules are designed to:
- Ensure that multinationals pay at least a minimum effective tax rate of 15% on profits earned in each jurisdiction.
- Reduce harmful tax competition between countries.
- Strengthen fairness in international tax collection.
- Promote transparency and consistency between national tax regimes.
This reform complements the objectives of Pillar One, which focuses on the reallocation of taxing rights over large digital companies, but with a broader scope, applicable to all economic sectors.
Technical structure of Pillar Two
The Pillar Two Model Rules, published by the OECD in December 2021 and updated through subsequent administrative comments, define the core mechanisms of the global minimum tax:
- Income Inclusion Rule (IIR):
Requires the parent entity of a multinational group to pay an additional tax when subsidiaries or affiliates in a given jurisdiction are taxed at an effective rate of less than 15%.
- Undertaxed Profits Rule (UTPR):
Acts as a backup measure, allowing other jurisdictions to apply a complementary tax if the parent or intermediate entity does not.
- Subject to Tax Rule (STTR):
This is a mechanism in bilateral tax treaties that authorizes source countries to impose an additional tax on certain intra-group payments, such as interest or royalties, when they are taxed at a rate below the agreed threshold.
Together, these rules seek to create a coordinated taxation network that ensures a minimum effective global tax rate and eliminates tax benefits derived from artificial structures.
Implementation stages and current status
The start of implementation of Pillar Two took place on January 1, 2024, with the launch of the Income Inclusion Rule (IIR).
During 2025, the Undertaxed Profits Rule (UTPR) began to take effect in several jurisdictions of the Inclusive Framework, particularly in Europe. Countries such as Denmark, Belgium, the Netherlands, France, and Germany have already incorporated the UTPR into their national legislation, while other economies—including several Latin American ones—are moving toward its adoption by 2026.
According to the OECD, the Inclusive Framework continues to issue administrative guidelines and technical guidance to ensure uniform application of the global minimum tax in the more than 140 participating jurisdictions, strengthening international coordination and reducing the risks of double taxation.
Impact on multinational companies
Pillar Two introduces a new dimension of tax complexity for multinational groups.
The main impacts include:
- Reconfiguration of tax structures:
Companies will need to review their operations in low-tax jurisdictions and consider adjustments to their financing structures, supply chains, or regional headquarters.
- Relevance for transfer pricing:
Transfer pricing and Pillar Two are closely linked. An adjustment in intra-group prices can alter a jurisdiction’s effective rate, affecting the calculation of the complementary tax.
Therefore, transfer pricing policies must be consistent with the expected results under the GloBE rules.
- Increased reporting obligations:
Companies will be required to prepare detailed reports that include accounting data, taxes paid, adjustments, and reconciliations between local and international standards.
The quality of tax information systems will be critical to complying with the new transparency standards.
- Financial and accounting impact:
Complementary taxes derived from Pillar Two may affect global effective rates, financial indicators, and budget planning at the corporate level.
Operational challenges and emerging risks
Despite international consensus, the practical implementation of Pillar Two presents significant challenges:
- Uneven regulatory synchronization: Some countries are moving faster than others, creating uncertainty about coordination between legislations.
- Potential double taxation: differences in interpretation between tax administrations can lead to conflicts that will require resolution mechanisms, such as Mutual Agreement Procedures (MAP).
- Data collection and internal resources: companies must invest in technological systems, specialized personnel, and internal tax audits to ensure proper application.
- Reputational risk: Non-compliance or errors in determining effective rates can lead to penalties and affect the public perception of companies.
Global perspectives and effects on tax policy
The OECD, through the BEPS Inclusive Framework, highlights that the implementation of the global minimum tax represents a step toward more equitable and sustainable taxation. The organization emphasizes that Pillar Two strengthens the integrity of the international tax system, reduces harmful tax competition, and promotes regulatory consistency among countries
As more jurisdictions fully adopt the Pillar Two rules, a transition to a more harmonized tax environment is expected, where strategies based on economic substance, operational efficiency, and regulatory compliance will prevail over aggressive tax planning.
Conclusion
The OECD’s Pillar Two represents a profound transformation of the international tax system, establishing a global minimum standard that redefines tax planning for multinational companies.
Beyond an obligation, it is an opportunity to enhance transparency, align tax policy with business strategy, and strengthen investor confidence.
In this new scenario, having a technical approach to transfer pricing and international taxation will be essential to anticipate the effects of the global minimum tax and ensure efficient and sustainable compliance.
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At TPC Group, we have more than 21 years of experience and a presence in 21 countries in Latin America, the United States, and Spain. Our multidisciplinary team provides technical advice on transfer pricing compliance, risk analysis, tax planning, and documentation under OECD guidelines. We assist multinational companies in the efficient management of their international obligations, promoting transparency, consistency, and tax certainty.
Source: OECD