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Pillar Two – Global minimum tax legislation expected

Authored by Le Roux Roelofse: Director and Head of Tax Technical | Deloitte Africa Tax & Legal, Ruben Johannes: Director and Pillar Two Champion for South Africa | Deloitte Africa Tax & Legal     

The OECD/G20 Inclusive Framework (Inclusive Framework), formed by the Organisation for Economic Co-operation and Development (OECD) together with the G20 countries has two pillars. These two pillars are aimed at ensuring that multinational enterprises (MNEs) pay a fair share of tax wherever they operate and generate profits. Work under Pillar One focuses mainly on the digital economy whereas Pillar Two focuses on other base erosion and profit shifting (BEPS) matters, including the introduction of a global minimum tax (GMT).  

In December 2021, the OECD published model rules that form the basis for a GMT. MNEs with annual consolidated revenue in excess of 750 million euros will be required to pay a minimum tax of 15% in each jurisdiction in which the MNE operates. If the minimum 15% tax has not been paid in a particular jurisdiction, additional top-up taxes are payable, although not necessarily in that jurisdiction. 

Jurisdictions that have already introduced final GMT legislation include the United Kingdom, Denmark, Hungary and Japan while countries such as Canada, Germany and New Zealand have introduced draft legislation 1

To date, neither South Africa nor any other African country has introduced any Pillar Two legislation. In the tax proposals forming part of the South African 2023 Budget Review the following was stated in relation to Pillar Two: “During the 2023 legislative cycle, government will publish a draft position on the implementation of Pillar Two for public comment and draft legislation will be prepared for inclusion in the 2024 Taxation Laws Amendment Bill”2. As it transpired, no such draft position was published in 2023. 

In October 2023 the African Tax Administration Forum (ATAF) issued its revised Suggested Approaches to Drafting Domestic Minimum Top-Up Tax Legislation. ATAF notes that many African countries have granted tax incentives to MNEs which could result in such MNEs having an effective tax rate of less than 15%. Where that is the case and the relevant country has not introduced Pillar Two legislation (and more specifically, a domestic minimum top-up tax); another tax jurisdiction, usually where the MNE is headquartered, will collect the top-up taxes due. Therefore, ATAF strongly recommended that African countries immediately enact domestic minimum top-up tax legislation “to protect themselves from giving away taxing rights to developed countries on top-up tax arising from their own tax incentives”3

Until such time that GMT legislation (including a domestic minimum top-up tax) is introduced in South Africa, it is possible that South Africa could lose out on top-up taxes to other jurisdictions that have implemented such legislation. We expect that the 2024 Budget Review may still include draft GMT legislation, including a domestic minimum top-up tax.  

It is worth noting that even if the introduction of GMT legislation in South Africa does not result in significant additional tax revenues, MNEs that meet the scoping requirements will nonetheless be required to comply with onerous reporting requirements. In this regard, more than 190 data points will be needed for every entity (including permanent establishments) within an MNE group and most of the data will have to be calculated specifically to comply with the GMT legislation. In other words, it’s not just about accessing new data; it’s also about obtaining, analysing, and reporting on information that was not previously captured for tax purposes, in new and different calculations.   

In any event, regardless of whether South Africa introduces GMT legislation, South African-based subsidiaries or permanent establishments of MNEs that are based in jurisdictions that have implemented legislation will have to perform the minimum tax calculations and comply with reporting requirements that feed into the parent entity’s reporting.  

In these circumstances, South African taxpayers that are likely to be caught by GMT legislation (either because South Africa introduces GMT legislation or because they are part of an MNE group that has presence in another jurisdiction that has introduced legislation) are well advised to prepare for the inevitable arrival of the legislation. This includes understanding the technical data and technological requirements, as well as assessing whether full compliance with the detailed rules is required or whether there are any “safe harbours” that could apply to significantly reduce compliance obligations during the transition period. 

1 Refer to Deloitte’s Global Pillar Two Legislative Tracker for up-to-date information on the status of GMT legislation across the globe.
2 2023 Budget Review Revenue Trends and Tax Proposals – Chapter 4, page 51.
3 Refer ATAF media statement dated 4 October 2023 (



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