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.
Background: what Pillar Two is and why it matters
OECD Pillar Two is part of the Two-Pillar Solution agreed in 2021 to address base erosion and profit shifting. The core rule: a multinational group with annual consolidated revenues of at least €750 million must pay an effective tax rate (ETR) of at least 15% in every jurisdiction where it operates. If the local ETR is below 15%, a “top-up” tax is collected — either by the home country of the parent company under the Income Inclusion Rule (IIR), or by a third-country intermediate parent under the Undertaxed Profits Rule (UTPR).
More than 140 jurisdictions have signed on to the framework. Major economies including the EU, UK, Australia, Canada, Japan, and South Korea have enacted domestic legislation; others continue to adopt. The GloBE rules are model legislation that jurisdictions implement in national law.
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 on real economic activity:
(eligible payroll × payrollRate) + (tangible asset book value × assetRate). - Excess profit = GloBE income − SBIE carve-out (the amount subject to top-up).
- Top-up tax = top-up percentage × excess profit.
If the jurisdiction has enacted a Qualified Domestic Minimum Top-Up Tax (QDMTT), that tax is collected locally and offsets the parent-level top-up to nil under the IIR, so the revenue stays in the source country rather than flowing to the parent’s home country.
The substance carve-out rates
The SBIE is intended to protect returns on real economic substance from top-up. The rates are transitional and step down toward a permanent steady-state level:
| Year | Payroll rate | Tangible asset rate |
|---|---|---|
| 2024 | 9.8% | 7.8% |
| 2025 | 9.6% | 7.6% |
| 2026 | 9.4% | 7.4% |
| 2027 | 9.2% | 7.2% |
| 2033+ (steady state) | 5.0% | 5.0% |
A jurisdiction with substantial local payroll and fixed assets shields more profit from top-up tax during the transitional period. A low-tax jurisdiction with real operations — a manufacturing hub, a data center with large server assets — may owe far less top-up than one hosting only headquarters functions.
Worked example
For illustration: a jurisdiction in 2026 with $100m GloBE income, $8m covered taxes, $20m eligible payroll and $50m tangible asset book value:
- ETR = $8m ÷ $100m = 8.0%
- Top-up percentage = 15% − 8% = 7.0%
- SBIE carve-out = ($20m × 9.4%) + ($50m × 7.4%) = $1.88m + $3.70m = $5.58m
- Excess profit = $100m − $5.58m = $94.42m
- Top-up tax = 7% × $94.42m ≈ $6.61m
If the same jurisdiction had enacted a QDMTT and already collected $6.61m locally at 15%, the IIR top-up at the parent level would be offset to zero.
Notes and limitations
This is a simplified estimate for planning purposes only. Real GloBE computations involve deferred-tax true-ups (GloBE uses an adjusted deferred tax rather than book deferred tax), the de-minimis exclusion (jurisdictions with annual revenue below €10m and income below €1m can be excluded), blending of entities within a jurisdiction, the GloBE Information Return filing obligations, and transitional safe harbours. Always confirm with a qualified international tax adviser before filing.