What is the OECD Pillar Two top-up tax?

Pillar Two ensures large multinational groups pay an effective tax rate of at least 15% in every jurisdiction. Where the local effective rate falls below 15%, a top-up tax is charged to bring it up to the minimum, calculated under the GloBE rules.

How is the effective tax rate computed?

The GloBE effective tax rate is covered taxes divided by GloBE income for the jurisdiction, expressed as a percentage. The top-up percentage is the shortfall between 15% and that rate, applied to excess profit.

What is the substance-based income exclusion?

The SBIE carves out a routine return on real activity from the top-up base: a percentage of eligible payroll plus a percentage of tangible asset book value. Transitional rates start at 9.8% payroll and 7.8% assets in 2024 and step down to 5% each by 2033.

A Qualified Domestic Minimum Top-Up Tax lets a jurisdiction collect its own top-up tax locally. Where a QDMTT applies, it reduces the top-up otherwise collectable by the parent under the Income Inclusion Rule to nil, so the revenue stays in the source country.

Is this a filed computation?

No. This is a simplified planning estimate. The full GloBE computation includes deferred-tax adjustments, the de-minimis exclusion, blended entities, and the GloBE Information Return. Use a qualified adviser for actual filings.

OECD Pillar Two Global Minimum Tax Calculator

This calculator estimates the top-up tax a multinational enterprise (MNE) may owe under the OECD Pillar Two global minimum tax. It computes the jurisdictional effective tax rate, applies the substance-based carve-out, and returns the top-up payable — with the QDMTT offset where relevant.

How it works

Pillar Two sets a 15% minimum effective tax rate per jurisdiction. The calculation proceeds in steps:

Effective tax rate (ETR) = covered taxes ÷ GloBE income.
Top-up percentage = max(0, 15% − ETR).
Substance-based income exclusion (SBIE) carves out a routine return: (payroll × payrollRate) + (tangible assets × assetRate).
Excess profit = GloBE income − SBIE carve-out.
Top-up tax = top-up percentage × excess profit.

If the jurisdiction operates a Qualified Domestic Minimum Top-Up Tax (QDMTT), that tax is collected locally and offsets the parent-level top-up to nil.

The substance carve-out rates

The SBIE rates are transitional and step down year by year:

Year	Payroll	Tangible assets
2024	9.8%	7.8%
2025	9.6%	7.6%
2026	9.4%	7.4%
2033+	5.0%	5.0%

A jurisdiction with real payroll and physical assets therefore shields more profit from top-up tax in the early years.

Worked example

A jurisdiction with $100m GloBE income, $8m covered taxes, $20m payroll and $50m tangible assets in 2024:

ETR = 8 ÷ 100 = 8%
Top-up % = 15% − 8% = 7%
SBIE = (20m × 9.8%) + (50m × 7.8%) = 1.96m + 3.9m = $5.86m
Excess profit = 100m − 5.86m = $94.14m
Top-up tax = 7% × 94.14m ≈ $6.59m

Notes

This is a simplified estimate for planning. Real GloBE computations involve deferred-tax true-ups, the de-minimis test, and the GloBE Information Return. Always confirm with a qualified tax adviser before filing.