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22 December 20227 minute read

Pillar 2 – OECD charges ahead, releasing additional guidance and public consultation documents

On December 20, 2022, the OECD released new guidance and public consultation documents on three topics in its continued effort to have the first elements of Pillar 2 in effect as of January 1, 2024.  These documents are not the highly anticipated implementation guidelines, which are to provide additional guidance in relation to interpretation and administration of the Pillar 2 Model Rules and which are also expected to contain guidance on how the US GILTI rules fit into Pillar 2. The OECD reconfirms that these implementation guidelines will be released on a rolling basis starting early in 2023.

The documents released this week by the OECD provide some further insights into the direction that the OECD is heading on key topics. These are issues which companies should start thinking about as implementation of Pillar 2 gets closer during 2023.

Based on feedback from earlier public consultations the OECD is now proposing safe harbors and simplification for a transitional period (until accounting fiscal years starting before June 30, 2026) based in part on already existing CbCR information and in part on each affiliate’s qualified financial statement data.  However, the OECD remains silent on the details for permanent safe harbors and simplifications, which appear to be relying on simplified application of the current Model Rules instead of the CbCR information.

Further, as part of a public consultation the OECD is providing a first glimpse in what will be required from a compliance perspective, the so-called GloBE Information Return.  Companies should review the draft information return set forth in the document to understand the amount of detailed information that will need to be provided for each of the entities in its corporate organization.

Summary of OECD Pillar 2 Guidance

The documents released on December 20, 2022 are:

  • Guidance on Safe Harbors and Penalty Relief

  • A public consultation document on the GloBE Information Return and

  • A public consultation document on Tax Certainty for the GloBE Rules.

The Guidance on Safe Harbors and Penalty Relief is based on agreed terms by the members of the Inclusive Framework, although certain parts still require further implementation guidance.  The 2 public consultation documents are in an earlier phase of development by the OECD hence the request for input from the public.

1.  Guidance on safe harbors and penalty relief

The guidance contains three parts: (i) transitional safe harbors, (ii) permanent safe harbors and (iii) penalty relief.  In particular, the section on permanent safe harbors requires additional implementation guidelines.

1.a         Transitional safe harbors

The OECD aims to introduce temporary safe harbors for the first three years of application of Pillar 2 up until fiscal years starting in June 2026 to reduce the compliance burden for companies.  The transitional safe harbor rules will allow companies to remove so called low-risk jurisdictions from detailed Pillar 2 compliance provided one of three tests is met.  These tests are based on CbCR country level income data already available to companies and separate qualified financial statement to determine qualified taxes paid.  The three tests are: (i) a de minimis test (<€10mln of revenue or <1€mln€ profit); (ii) a simplified ETR test with safe harbor tax rates 15 percent (year1), 16 percent (year 2) and 17 percent (year 3); or (iii) a routine profit test based on the substance based exclusion.

1.b         Permanent safe harbors

The permanent safe harbors are based on the same three tests as the transitional safe harbor rules. However, instead of relying on CbCR income data these tests are based on simplified versions of the current Pillar 2 Model Rules.  The OECD will be announcing additional implementation guidelines to provide more detail on these proposals.

1.c         Penalty relief

The OECD aims to minimize any penalties in the transition period (up until book years starting in 2026) as long as companies can demonstrate a good faith effort to comply with the new Pillar 2 rules.

2.  A public consultation document on the GloBE Information Return

This public consultation document seeks input on the amount and type of information MNE Groups shall be expected to collect, retain or report for the application of the GloBE rules and possible simplifications that could be incorporated in the GloBE Information Return as well as the ability of MNE Groups to provide alternative data. Annex A of the document lists the data that would be necessary to calculate MNE Groups’ GloBE tax liability.

These data can be grouped in four sections, namely:

  • General information about the MNE Group and the Filling Constituent Entity

  • Corporate structure of the MNE Group including each Constituent Entity’s ownership structure, whether it is required to apply the IIR and whether the UTPR could apply with respect to such Constituent Entity, as well as information about changes to the ownership structure that took place during the Fiscal Year

  • ETR computation and Top-up Tax computation, which includes information about the Effective Tax Rate and Top-up Tax computations for those jurisdictions where Constituent Entities are located. This section would also incorporate the simplified compliance procedures associated with any agreed safe harbors

  • Top-up Tax allocation and attribution. 

Based on this consultation document it is expected that the reporting requirements for tax authorities across the globe will become more standardized and automated, which will make exchange of information among tax authorities easier.

3.  A public consultation document on Tax Certainty for the GloBE Rules

With this document the OECD aims at providing a menu of options to deal with dispute prevention as well as with dispute resolution.

The first set of mechanisms should apply at an early stage in advance of any taxation action being taken, ie, in the compliance or assessment process. Relying on these mechanisms should prevent inconsistent outcomes when applying the Model Rules given possible differences in interpretations or technical difficulties. In particular, the public consultation document suggests the following instruments to deal with reducing controversy:

  • A multilateral Inclusive Framework (IF) member review process which would recognize the “Qualified” Rule Status of a country’s implementing legislation according to the GloBE definitions.

  • Referral to IF members for clarification on specific issues.

  • A common risk assessment and coordinated compliance process, using a program similar to ICAP, which would allow taxpayers to receive comfort on the accuracy of their calculation from tax authorities.

  • Certain binding instruments similar to those already used in other fields, eg, APA-like mechanism based on an ad-hoc common standard.

The document also introduces proposals for dispute resolution mechanisms which would be necessary when the dispute prevention measures fall short, including:

  • Developing a multilateral convention to ensure coordination on implementation

  • Reliance on competent Authority agreements for the exchange of information

  • Reliance on existing tax treaties and relevant MAP provisions

  • New mechanisms like creating a dispute resolution provision in domestic law.


As the January 2024 expected date to implement Pillar 2 draws closer, the guidance OECD issued on December 20 provides affected companies with further insights into the detailed compliance efforts that will be required once Pillar 2 is implemented. Accordingly, affected companies should review the most recent guidance to begin planning for implementation of Pillar 2 beginning January 1, 2024.

OECD has requested that comments on the two consultation documents be submitted by February 3, 2023.

Learn more by contacting any of the authors.