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ARTICLE · 29 DECEMBER 2021

The OECD's Pillar Two Model Rules Have Arrived

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On December 20, 2021, the OECD released the Model Rules for Pillar Two or the "Global Anti-Base Erosion" (GloBE) Rules.

United StatesTax
Jenny A. Austin
Jenny A. Austin
Michael Lebovitz
Michael Lebovitz
Tyler M. Johnson
Tyler M. Johnson
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On December 20, 2021, the OECD released the Model Rules for Pillar Two or the "Global Anti-Base Erosion" (GloBE) Rules.1 The GloBE Rules are the first step towards implementing the groundbreaking international agreement reached by more than 135 countries announced by the OECD/G20 Inclusive Framework in October 2021.2 Pillar Two provides for a minimum 15% tax on corporate profits for multinational enterprises (MNEs) with more than EUR 750 million in consolidated revenues.

The GloBE Rules are composed of an (i) income inclusion rule (IIR) and (ii) undertaxed payment rule (UTPR). To the extent a MNE is subject to the GloBE Rules, the IIR would seek to impose a top-up tax on a parent entity on the income of a constituent entity that is taxed at an effective rate below 15%. The UTPR would deny deductions or require an equivalent adjustment to the extent the income of a constituent entity is taxed under the 15% tax rate threshold.3 The GloBE Rules provide a 5-step

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