The first BEPS package changed how existing rules were applied; Pillar Two adds a new minimum tax computed from accounting data no existing return produces.
The first BEPS package changed how existing rules were applied; Pillar Two adds a new minimum tax computed from accounting data no existing return produces.
| Pillar Two | BEPS 1.0 | |
|---|---|---|
| Mechanism | A minimum effective tax rate per jurisdiction | Anti-abuse and transparency measures within existing rules |
| Outputs | Top-up taxes and new returns | Country-by-country reporting, the MLI, the principal-purpose test |
| Data needed | Adjusted accounting data by constituent entity | Transfer-pricing and treaty documentation |
| In scope | Groups above a consolidated revenue test | Effectively all multinational groups |
| First task | Identify constituent entities and map the data | Get documentation and treaty positions in order |
If the group is above the revenue test, Pillar Two is a data project before it is a tax project. Below it, the first package's obligations still apply in full and are where the exposure actually sits.
If you already have an adviser, we will tell you what they should be asking rather than replacing them.
Reviewed for the 2025 and 2026 filing seasons by Udit Gupta, International Tax, Cross-Border Tax & Transfer Pricing Expert, Legal Quotient Consultants. General information, not advice for your circumstances — call our 24-hour helpline to discuss your own position.
This is the page to read on pillar two beps. It takes pillar Two vs BEPS 1.0 in order — the test that decides who is affected, the returns and forms that follow from it, and a fee quoted in writing before anything starts.
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An unfiled history is not a reason to wait longer. We assess what is still open and what relief the delay attracts before the first return goes in.
The heaviest exposure on a cross-border file is usually a disclosure form, not the tax. We identify which ones apply before a deadline turns into a penalty.
Where a rate or a threshold appears in our writing it names the tax year it belongs to. Where it could not be confirmed, the page describes the mechanism and quotes no number.
A group with operations in several countries had been told by a bank that it needed to prepare for a minimum tax and arrived expecting a large project. We took the consolidated accounts, applied the revenue test and documented the conclusion, which was that the group sat below it. The engagement produced a written scoping memorandum the board could rely on, the working behind it, and a note of the figure at which the answer would change. That turned an open-ended worry into a defined item to revisit, and redirected the work towards the obligations that did apply.
A group that had grown by buying businesses in different countries held a legal entity list maintained by the company secretarial team and a consolidation that did not match it. Before any computation could be attempted, the population of entities had to be settled. We reconciled the consolidation against the entity register, identified branches and partnerships that appeared in one and not the other, and resolved each difference. The engagement produced an agreed list of constituent entities by jurisdiction, a record of how each inclusion or exclusion was decided, and an owner inside the group for keeping it current.
A finance team could produce group accounts and statutory accounts but nothing in between at the granularity the computation needed. We worked with the controllers to trace where each constituent entity's figures originated, what adjustments were being made on consolidation, and which of those adjustments mattered for an effective rate calculated by jurisdiction. The engagement produced a documented data map from source ledger to the figures the computation consumes, a list of the gaps that had to be closed in the reporting system, and a first set of jurisdictional results the team could reproduce themselves.
Having concluded that the minimum tax did not reach them, a group assumed the wider international agenda was someone else's problem. We reviewed what the earlier package actually required of them and found transfer-pricing documentation that had not been refreshed since the structure changed, and intra-group arrangements that predated the current treaty position. The engagement produced updated documentation for the material flows, a reasoned file on the arrangements most likely to be questioned, and a short list of changes the group made before an authority raised them rather than afterwards.
A holding structure had been put in place long before the multilateral instrument changed the treaties it depended on, and nobody had revisited it since. We identified which treaties in the chain had been modified, what the principal-purpose test meant for each arrangement, and where the commercial reasons for a structure existed but had never been written down. The engagement produced a documented rationale for each entity in the chain, a note of the arrangements where the position was genuinely weak, and a recommendation on those, which the group acted on.
A group had been filing its country-by-country report from a spreadsheet built each year by a different person, and the figures no longer tied to anything. We rebuilt the report from the consolidation, reconciled each jurisdiction to the underlying statutory results, and documented every difference that survived. The engagement produced a report that could be traced back to source, an explanation of the remaining variances written down before anyone asked for it, and a repeatable process. It also gave the group a head start on the data question the minimum tax would put to it later.
The arrival date splits the year and sets the cost base of what you brought with you. Getting that date and those values right is what determines whether a later sale is taxed on the whole gain or only on the part that accrued after landing.
Read how this one runsHolding a green card does not end the US filing obligation, and living in Canada starts a Canadian one. The engagement fixes residence under the treaty tie-breaker, then decides which return the relief is claimed on so the two do not contradict each other.
Read how this one runsAll case studies — every published engagement in one place.
Strategy and compliance for income, assets and families spread across borders.
Software revenue crosses borders by default — sourcing rules, withholding on licence-like payments and IP location decide the effective rate.
Software revenue is rarely taxed where the team sits. Licence, subscription and service income are characterised differently by each side, and the answer decides withholding at source, treaty relief and whether a foreign customer creates a taxable presence at all — questions that are cheap to settle before the contract and expensive afterwards.
No, they are separate obligations. The original BEPS package changed how existing transfer pricing and treaty rules are interpreted and applied, and compliance with it does not satisfy Pillar Two, which is an entirely new minimum tax computed from the group's consolidated accounting figures rather than from adjustments to existing income tax rules.
Pillar Two's calculation starts from financial accounting income taken from the group's consolidated statements, adjusted by a defined set of items, rather than from taxable income as computed under any single country's tax code. This means finance teams need country-by-country financial statement data organized in a format standard tax provision work does not normally produce.
Yes, that is a central mechanic of the rules: if the country where a low-taxed entity operates does not itself collect a qualifying top-up tax, the rules allow another jurisdiction in the group's structure, typically the parent's country, to collect it instead, so the tax is not simply lost, but which country receives it depends on which rules each jurisdiction has adopted.
No, the two operate side by side. Transfer pricing rules from the earlier BEPS package continue to determine how much profit is allocated to each entity under the arm's length principle, and Pillar Two is applied afterward, on top of that allocated result, to test whether the effective rate on it meets the agreed minimum.
The minimum tax is aimed at groups above a revenue scale that most businesses never reach, so a smaller cross-border group is generally outside its direct scope. The earlier BEPS measures, by contrast, changed rules like treaty access and transfer pricing documentation that reach groups of every size, which is the practical difference for most of our clients.
It is computed from consolidated financial accounting figures adjusted under the rules, not from any existing tax return, so a group inside scope needs a data set that its ordinary compliance process may never have assembled. The earlier BEPS changes worked through returns and documentation the group was already producing, which is why the two are so different to implement.
Where our partners studied — CPA Canada (In-Depth Tax Program), AICPA, the Institute of Chartered Accountants of India and the Malaysian Institute of Accountants.
