Pillar Two: What Investment Funds Need To Know

Background

Pillar Two is an international tax reform initiative that aims to ensure that large multinational groups pay a minimum effective tax rate of 15% on all their profits, on a country-by-country basis.

This is to be achieved by countries implementing top-up tax rules – known as the GloBE Rules – under which they will charge parent companies in large multinational enterprise (MNE) groups a top-up tax in respect of the profits of any low-taxed foreign subsidiaries they have. Many participating countries, including the UK, Luxembourg, and most EU Member States, have implemented the GloBE Rules for accounting periods beginning on or after 31 December 2023.

Groups that are in scope of the GloBE Rules will face new, potentially onerous, reporting requirements, as well as potential new tax liabilities if they have low-taxed profits.