Global Minimum Tax (Pillar Two) & BEPS Advisory

What is the global minimum tax?

Pillar Two, part of the OECD/G20 project on base erosion and profit shifting (BEPS), introduces a global minimum effective tax rate of 15% for large multinational groups — those with consolidated revenue of €750 million or more. Where a group's profits in a country are taxed below 15%, a 'top-up tax' can be collected, either in that country or in another country where the group operates.

Many countries have implemented these rules. Indian entities of in-scope groups are affected even where India's own implementation differs, because their parent or other group countries may apply the rules, and the group needs detailed data from India to compute its position.

The key terms

The Pillar Two building blocks:

In-scope groups

Multinational groups with annual consolidated revenue of €750 million or more in at least two of the four preceding years.

Effective tax rate (ETR)

Covered taxes divided by GloBE income, computed for each country where the group operates.

Top-up tax

Tax to bring the ETR in a low-taxed country up to 15%.

Income Inclusion Rule (IIR)

Lets the parent's country collect top-up tax on low-taxed subsidiaries.

Undertaxed Profits Rule (UTPR)

A backstop allocating top-up tax to other group countries where the IIR doesn't apply.

Domestic minimum top-up tax (QDMTT)

Lets the low-taxed country itself collect the top-up tax first.

GloBE Information Return

A standardised return with detailed data for each country, filed by or for the group.

Why it matters for India

Indian entities of large groups are affected even if they pay normal Indian tax:

Incentives can lower ETR

Tax holidays, SEZ benefits, and other incentives can reduce the Indian ETR for GloBE purposes.

Top-up tax elsewhere

If India's ETR is below 15%, another country may collect top-up tax on Indian profits.

Data demands

Groups need detailed Indian data, often on tight timelines.

Accounting differences

GloBE uses the parent's accounting standard, so Indian figures need adjusting.

Deferred tax matters

Deferred tax affects the ETR, so Indian deferred tax calculations need care.

Incentive decisions

The value of Indian incentives to a group may change under Pillar Two.

Evolving rules

Guidance, safe harbours, and country implementation continue to develop.

Who is this for?

Pillar Two applies only to groups above the revenue threshold. Most Indian businesses aren't affected directly.

The Pillar Two rules compared

Who collects the top-up tax:

What we'll need from you

Group information

Group structure, revenue, and the group's Pillar Two approach.

Indian financials

Accounts, adjusted to the group's accounting standard where needed.

Tax data

Current tax, deferred tax, and the effect of incentives.

Substance data

Payroll costs and tangible assets in India, for the substance-based income exclusion.

Incentive details

SEZ units, tax holidays, and other incentives claimed.

Group timetable

When the group needs the data.

Pillar Two advisory is quoted per engagement.

How we help

Typical support for an Indian entity:

1. 1

   Confirm scope

   We confirm whether the group is in scope and which rules affect India.

2. 2

   Map data needs

   The group's data requirements are mapped to Indian records.

3. 3

   Compute Indian ETR

   The Indian effective tax rate is estimated, including incentives and deferred tax.

4. 4

   Test safe harbours

   Transitional and other safe harbours are tested where available.

5. 5

   Build the data pack

   A repeatable process produces the data each year.

6. 6

   Advise on incentives

   The Pillar Two effect of Indian incentives is considered for decisions.

Staying ready

Pillar Two is an annual process:

Annual data

Produce the data pack each year to the group's timetable.

Track Indian developments

Monitor India's position on Pillar Two and any domestic top-up tax.

Track guidance

OECD guidance and safe harbours continue to evolve.

Review incentives

Reassess incentives as Pillar Two changes their value.

Align with TP

Keep transfer pricing and Pillar Two data consistent.

Document

Keep workings for group and tax authority review.

Benefits and responsibilities