Pillar Two after year one: Building toward a durable compliance model

One framework, many implementations

Pillar Two was envisioned by the Organisation for Economic Co-operation and Development (OECD) as a global framework, with enacting jurisdictions working to achieve a goal of a truly global minimum tax for corporate taxpayers. In practice, the first filing cycle brought to life considerable variation in how jurisdictions implemented the framework, with differing filing requirements.

• Some jurisdictions required only a registration and/or a GloBE Information Return (GIR) notification, a comparatively light-touch approach.
• Some jurisdictions limited separate filing requirements, even incorporating the annual registration into the existing corporate tax return.
• Other jurisdictions required a domestic minimum top-up tax filing even where a group qualified for a safe harbor. Relief at the global level through safe harbors did not extend to relief from the local filing obligation.
• The unit of filing itself varied, with some jurisdictions organizing data by jurisdiction and others by legal entity, resulting in the need for different data and processes.

Variation extended beyond the filing requirements themselves. Signature requirements, authorized signatories, and submission mechanics were determined differently across many jurisdictions, often being finalized late in the process.

Governmental portal and technology issues became apparent as taxpayers attempted to use the systems at scale for the first time. The GIR XML schema had errors that were identified and partially addressed late in the filing season, and numerous countries had issues implementing the schema. Much validation work was done late in the filing process, and in some jurisdictions, taxpayers did not receive proof of filings.

For organizations operating across multiple jurisdictions, the first cycle functioned less as a single tax calculation exercise and more as the simultaneous execution of distinct compliance relationships, many governed by rules and systems still being finalized at the time of filing.

What distinguished organizations that managed the transition well

Across new forms, evolving guidance, and government systems still under development, one consistent pattern emerged: Organizations that established a repeatable internal process before forms were finalized were better positioned once filing portals became available.

The distinguishing factor in year-one success was not the thoroughness of an organization’s analysis of the technical requirements. Taxpayers had largely determined safe harbor qualifications and top-up tax liabilities well in advance of filing due dates. Rather, the success was based on whether the organization had already:

• Standardized its data model across jurisdictions.
• Started compliance activities several months prior to the filing deadlines.
• Centralized coordination, data collection, and process management rather than managing each jurisdiction independently.
• Approached authorization and registration requirements as a coordinated program rather than a series of individual requests.

An uneven maturity curve

Year two is expected to be smoother than year one in jurisdictions where the process has already run once. Tax authorities devoted substantial effort over recent months to refining portals, correcting schema errors, and working with filers and advisers to resolve issues identified under deadline pressure. Improvement of this kind often compounds over successive cycles.

However, year two introduces many obligations that did not exist in year one, and these may not benefit from the same maturity curve. A number of additional jurisdictions are applying Pillar Two rules for the first time for tax year 2025, meaning organizations with operations in those jurisdictions may face a filing experience closer to a first cycle than a second cycle, including much of the early uncertainty around forms, portals, and validation rules described above. Separately, the UTPR applies for the first time in year two, introducing new computations and data requirements even for organizations that filed successfully in year one.

An additional consideration for year-two obligations is the filing cycle is three months shorter than the first year. For calendar-year taxpayers, this means a March 31, 2027 deadline for 2025 compliance. This deadline may conflict with other year-end financial reporting commitments at many organizations and likely pushes compliance into late 2026 to avoid resource challenges.

Organizations should plan for year-two workloads, anticipating these additional hurdles, rather than assuming broad, evenly distributed improvement across their full filing footprint. The practices that separated well-prepared organizations from others in year one remain directly relevant to these new filings.

Building the next phase of readiness

Organizations that treat Pillar Two as a standing, yet evolving, operational need may be better positioned to manage Pillar Two requirements well into the future. In practice, this capability depends on a limited number of structural decisions, including:

These are not one-time considerations. Each requires planning for investments in infrastructure, project management, and people skills. Organizations building this plan now may find themselves more prepared for Pillar Two processes each year.

Implications for tax leaders

Nothing seen so far indicates that Pillar Two compliance is approaching simplicity. Jurisdictions are likely to continue interpreting shared rules differently for some time, and areas such as penalty relief, safe harbor mechanics, and information-exchange arrangements remain under active development.

What does appear to be shifting is where the greatest effort is required. In year one, the principal challenge was establishing the infrastructure and relationships necessary to file at all. In year two, the challenge will likely be the expansion of requirements in new jurisdictions and new UTPR reporting, all within a shorter timeline. Building a compliance function resilient enough to absorb successive rounds of guidance without repeating the same adjustments each cycle will be important.

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