Operations & compliance
Pillar Two
Pillar Two is the OECD framework introducing a global minimum effective tax rate of 15% for large multinational groups, calculated on a jurisdiction-by-jurisdiction basis, and it operates alongside rather than instead of existing transfer pricing rules, so arm's length pricing still determines where profit is recognised.
While Pillar Two does not replace transfer pricing, it changes the stakes of getting intercompany pricing wrong, since profit shifted into a jurisdiction that then falls below the 15% effective rate can trigger a top-up tax, meaning transfer pricing decisions now have a direct and immediate cash tax consequence.
Groups need reliable, well-documented intercompany data not just for transfer pricing defence but as direct input into Pillar Two effective tax rate calculations, making accurate intercompany accounting and consistent recharge practices more financially important than they have ever been before. This matters in practice.
In practice
What matters when applying pillar two
- Understand the 15% minimum rate mechanics
- Map jurisdictions at risk of falling below 15%
- Keep intercompany data Pillar Two-ready
- Coordinate TP and Pillar Two teams closely
- Watch for qualified domestic top-up taxes
Frequently asked
Common questions
Does Pillar Two replace transfer pricing rules?+
No, Pillar Two operates alongside existing transfer pricing rules, using arm's length pricing outcomes as an input into its own separate minimum tax calculation. This matters in practice.
Why does intercompany pricing matter more under Pillar Two?+
Because profit shifted to a low-tax jurisdiction can now trigger a top-up tax if the effective rate there falls below 15%, giving pricing decisions a direct cash tax impact. This matters in practice.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.