If your company operates across borders, you may have heard about "Pillar Two" or the global minimum tax.
Pillar Two is an international framework designed to make sure that large multinational businesses pay at least a 15% minimum level of tax in each country where they operate. Many countries have started putting these rules into their own laws, which means U.S. business compliance can be affected even when the United States has not adopted every part of the framework.
What U.S. Businesses Should Know
- Pillar Two generally targets large multinational groups with roughly 750 million euros or more in annual global revenue – smaller businesses are typically not in scope. (Please note that exchange rates between euros and U.S. dollars are always changing. As of the publication of this article, Pillar Two would generally target large multinational groups with roughly $853M or more in annual global revenue.) The threshold is generally tested by looking at whether the group met the revenue level in at least two of the four preceding fiscal years.
- The rules look at your effective tax rate country-by-country, not just your overall worldwide rate.
- If profits in a country are taxed below 15%, an additional "top-up" tax may apply somewhere in the group.
- Even U.S.-parented groups can face obligations abroad, because foreign countries where you have subsidiaries or operations may impose their own minimum tax and reporting rules.
- Certain U.S. taxpayers, including qualifying U.S. ultimate parent entities of large multinational groups, may also be required to file Form 8975 with their U.S. tax return.
- Good record-keeping matters. Financial statement data, country-by-country reporting, and local filings all support your Pillar Two position.
- Timelines are already here. Many rules apply to tax years beginning in 2024 and later, with additional changes phasing in for 2026 and beyond.
Where The U.S. Side-By-Side Agreement Fits
One important development is the U.S. side-by-side agreement. Announced in January 2026, this agreement is an international understanding that states certain U.S.-parented multinational groups may be relieved from some of the more burdensome Pillar Two charges (known as the income inclusion and undertaxed profits rules) beginning in 2026 and later years. This is welcome news, but it is not a complete exemption. Individual countries where your business operates may still apply their own local minimum tax, so some tax obligations and filings may remain in place. The details continue to evolve, making it wise to review your position regularly.
Simple Applicability Checklist
- Is your group's total annual global revenue near or above 750 million euros ($853M as of July 24, 2026)? The threshold is generally tested by looking at whether the group met the revenue level in at least two of the four preceding fiscal years.
- Does your business have subsidiaries, branches, or operations in more than one country?
- If you have subsidiaries, branches, or operations in other countries, do those countries tax your profits at a low effective rate?
If you answered yes to any of the questions above, gather your financial and ownership records and seek a professional review.
How GBQ Can Help
Navigating Pillar Two does not have to be overwhelming. GBQ's international tax professionals can help you determine whether these rules apply to your business, clarify your tax obligations, and build a practical plan for compliance. Contact GBQ today for a professional review of your international tax obligations.