The future of global tax: Navigating BEPS 2.0 and Pillar 2

The global tax landscape is in the midst of major transformation with governments focusing on modernising tax rules for multinational digital businesses, and looking at ways to ensure multinationals pay tax in countries where they do their business.

BEPS (Base Erosion and Profit Sharing) 2.0 and Pillar 2 are at the heart of the global tax reforms as they aim to alter how multinational businesses are taxed, by introducing a global minimum 15% tax to reduce the incentive for profits to be moved to tax havens.

What is BEPS 2.0?

BEPS 2.0 builds upon the OECD’s (Organisation for Economic Co-operation and Development) original BEPS which established transparency standards internationally and made country-by-country reporting mandatory. The focus of BEPS 2.0 is to prevent profit shifting, increase fairness, and improve tax transparency. One of the main components of BEPS 2.0 is Pillar 2.

Pillar 2: A global minimum tax rate

Pillar 2 introduces a global minimum tax rate of 15% across multiple jurisdictions. These measures apply to groups with consolidated annual revenues in excess of €750 million in two of the last four accounting periods.

There were two new taxes introduced in the UK as part of Pillar 2:

• Multinational top-up tax (MTT) – applies to groups who have both UK and overseas operations
• Domestic top-up tax (DTT) – applies to groups who only have operations in the UK

UK-only groups must register for DTT. Groups with entities within and outside the UK must register for both MTT and DTT.

For these rules, a UK branch is treated its own entity, meaning having a UK branch is enough to bring a multinational group into scope for HMRC registration.

Pillar 2 applies to accounting periods starting on or after 31 December 2023. Businesses then have six months from the end of their first accounting period beginning after this date to register with HMRC. As an example, a business with an accounting period ending 31 December 2025 would need to register by 30 June 2026.

Whilst over 140 nations have committed to the implementation of Pillar 2, it was announced in January 2026 that the United States would not be adopting them. Our previous insight explores what the US are doing instead and how this affects UK businesses who are part of a US-headquartered group.

Impact on multinational groups

The introduction of Pillar 2 means that multinational groups are no longer able to rely on low‑tax jurisdictions to help with their tax efficiency and will lead many to reassess where their holding companies are located, and the structure of their group.

Financing arrangements may also need revisiting, as interest payments, hybrid loans, and money moving between group companies can unintentionally trigger top‑up taxes or affect how each country’s effective tax rate (ETR) is calculated under the Global Anti-Base Erosion (GloBE) rules.

If the ETR of areas of the business where operations are based, where goods are procured, or where intellectual property is held, fall below 15%, restructuring of these areas may be required. Businesses will therefore need to ensure they have accurate, detailed financial and tax data across all jurisdictions in which they operate to meet the increased compliance requirements.

Transitional safe harbours

The OECD has introduced criteria to allow multinational businesses to use less detailed data to show that they aren’t at risk of being undertaxed in a jurisdiction.

Multinational businesses can also defer top-up tax calculations during the transition period if they meet any of the following:

• A revenue of less than €10m and profit or loss of less than €1m in that country shown in their country-by-country reporting (CbCR).
• Their simplified ETR in the country is at least 17%.
• Their profit in the country before tax is equal to or less than the substance based income exclusion (SBIE)* calculated.

*SBIE is a rule which allows multinational businesses to exclude some of their profits from the top-up tax calculation if the profits are supported by real economic activity in that country.

How businesses can prepare

Multinational organisations should take a proactive approach to preparing for future changes to the global tax landscape. As filings and calculations gain complexity as part of the GloBE rules, multinationals will benefit from ensuring they have the processes and technology in place to support the more in-depth data requirements, and that their finance and data teams understand the new rules.

In addition to this, multinationals can prepare by:

1. Monitoring legislation changes across all countries where they operate;
2. Carrying out impact modelling to work out which countries are likely to be affected, and review the group structure using this data.

We’re here to help

If you have any questions about whether your group is affected or would like some assistance on BEPS 2.0 Pillar 2 compliance, please get in touch with a Corporate tax specialist or speak to your usual Azets adviser.