- The OECD/G20 Inclusive Framework released a September 2026 Pillar Two package focused on strengthening consistency, tax administration, and certainty for multinational enterprise groups.
- The package includes a full legislative peer review framework, an updated GloBE Information Return and Administrative Guidance on explicitly conditional taxes and QDMTT safe harbor issues.
- In-scope MNE groups should reassess Pillar Two governance, GIR reporting processes, covered tax positions, local QDMTT assumptions, and data readiness for fiscal years beginning on or after December 31, 2025.
On 11 September 2026, the OECD/G20 Inclusive Framework (IF) on BEPS released a package intended to support consistent implementation and administration of the Pillar Two global minimum tax rules. The package includes a framework for full legislative peer reviews, an updated GloBE Information Return (GIR), and additional Administrative Guidance on explicitly conditional taxes and Qualified Domestic Minimum Top-up Taxes.
For in-scope multinational enterprise (MNE) groups, the release may affect reporting systems, jurisdictional risk assessments, covered tax positions, and reliance on QDMTT safe harbors for fiscal years beginning on or after December 31, 2025.
Full Legislative Peer Review
The Terms of Reference and Assessment Methodology provide the detailed architecture for moving from temporary self-assessment of Pillar Two regimes to a formal peer review process. Under the framework, the IF will assess whether a jurisdiction’s income inclusion rule (IIR), under-taxed profits rule (UTPR) and QDMTT legislation is consistent with the GloBE Model Rules, Commentary, and Administrative Guidance. The review will evaluate the design of the domestic rules, including whether any departures from the agreed rule set could affect the regime’s qualified status. Where inconsistencies are identified, the IF may issue recommendations to assist the jurisdiction in bringing its rules into alignment.
The methodology is significant because qualified status under Pillar Two determines how other jurisdictions are expected to treat a jurisdiction’s domestic rules for purposes of applying the rule order, avoiding duplicative top-up tax, and determining whether a QDMTT safe harbor is available. In practice, the peer review process may become a key mechanism for identifying legislative divergence that could otherwise create inconsistent outcomes for MNE groups operating across multiple implementing jurisdictions.
The timing rules also warrant attention. The start of a full legislative review generally depends on when a jurisdiction initiates the process and when its Pillar Two rules became effective. Jurisdictions with legislation effective on or before April 1, 2025 generally have a transitional three-year period to initiate review. For jurisdictions that implement later, the review process is expected to operate closer to the effective date of the rules. Any adverse qualified-status outcome would generally be expected to apply prospectively by fiscal year, but taxpayers should monitor how domestic law and OECD review outcomes interact in each relevant jurisdiction.
From a taxpayer perspective, the full legislative review framework means Pillar Two implementation should be tracked as an ongoing governance matter rather than a one-time enactment issue. Groups should identify jurisdictions where qualified IIR, UTPR or QDMTT status is material to their expected top-up tax position, monitor whether those jurisdictions have initiated review, and consider the potential impact of recommendations or legislative amendments on financial statement estimates, compliance calendars and internal controls.
Updated GIR
The updated GIR is the standardized information return intended to facilitate both taxpayer compliance with, and tax administration of, the global minimum tax. The September 2026 version incorporates the January 2026 side-by-side package and is to be used only for GIR filings relating to fiscal years beginning on or after December 31, 2025 (for prior coverage, see the tax alert, OECD Releases Guidance on Side-by-Side System, published on January 8, 2026). Accordingly, taxpayers should distinguish the September 2026 GIR from earlier GIR versions used for prior fiscal years and should confirm which version applies in each filing jurisdiction.
The revised GIR reflects the IF’s continued effort to balance standardized reporting with administrability. While the update incorporates agreed simplifications, the GIR remains a detailed jurisdictional reporting package that requires information on group structure, constituent entities, allocation of GloBE income or loss, adjusted covered taxes, effective tax rate computations, top-up tax outcomes, and the application of safe harbors or other relieving provisions. As a result, the practical compliance burden will continue to depend on the quality of source data, consolidation processes, and local jurisdictional reporting requirements.
Taxpayers should also monitor the revised XML schema and any related tax administration guidance. Groups that have designed GIR workpapers, data models, or technology workflows based on earlier versions may need to update data fields, validation checks, review protocols, and filing calendars. In addition, because jurisdictions may implement local notification and filing requirements differently, MNE groups should confirm whether central filing and exchange mechanisms will fully satisfy local obligations or whether local filings, notifications, or supplemental disclosures remain necessary.
Administrative Guidance
The September 2026 Administrative Guidance supplements the Commentary to the GloBE Model Rules and addresses two technical areas that can materially affect both Pillar Two liability and compliance processes: explicitly conditional taxes and the application of the QDMTT safe harbor where local financial accounting standards are used. The guidance should be read together with domestic implementation rules because the timing and legal effect of Administrative Guidance may depend on how each jurisdiction incorporates OECD guidance into local law.
On explicitly conditional taxes, the guidance implements the principle that a tax should not be treated as a covered tax if it applies only because the taxpayer is subject to a qualified IIR or UTPR in another jurisdiction. In that circumstance, the local tax does not operate as a generally applicable income tax; instead, it is triggered by another jurisdiction’s application of the GloBE rules. The practical consequence is that the tax generally is excluded from adjusted covered taxes for GloBE purposes. This can reduce the jurisdictional covered tax numerator, lower the jurisdictional effective tax rate, and increase the amount of top-up tax that may be imposed under a QDMTT, IIR or UTPR. This aspect of the guidance is particularly relevant for jurisdictions considering defensive taxes, surtaxes, refundable mechanisms, or targeted regimes that are linked expressly to whether another jurisdiction would otherwise collect top-up tax. Taxpayers should review local taxes, incentives and credit regimes to determine whether any feature is conditioned on exposure to a foreign IIR or UTPR. The OECD has also indicated that further guidance is expected on other tax features that may be viewed as discriminatory and therefore may be excluded from covered taxes, so MNEs should continue to monitor developments beyond the explicitly conditional tax category.
The second part of the guidance addresses the QDMTT safe harbor in cases where the QDMTT is calculated using local financial accounting standards and the local accounting period differs from the ultimate parent entity’s fiscal year. The guidance clarifies that the use of local accounting standards does not, by itself, prevent reliance on the QDMTT safe harbor where the relevant conditions are otherwise satisfied. However, fiscal-period mismatches may require taxpayers to test QDMTT outcomes across more than one local accounting period or to perform additional allocations so that local QDMTT calculations can be reconciled with the ultimate parent entity’s fiscal year for GloBE purposes.
For groups relying on the QDMTT safe harbor, this clarification is helpful but operationally demanding. It may require coordination among tax, statutory reporting and consolidation teams to align local accounting-period data with group reporting periods, identify timing differences, and document the basis for any allocation or reconciliation. Groups should also confirm whether local QDMTT legislation permits the relevant accounting-standard approach and whether local filing deadlines allow sufficient time to complete the additional reconciliation work.
The Administrative Guidance therefore has both substantive and procedural implications. Substantively, it can change the covered tax computation and the availability of safe harbor protection. Procedurally, it may require changes to tax provision models, data collection templates, control documentation, and jurisdictional review processes. MNE groups should evaluate whether any positions taken for financial reporting or compliance purposes need to be revisited before the relevant GIR or local QDMTT filings are finalized.
BDO Perspective
The OECD release underscores that Pillar Two is moving from rule development to implementation and administration, with increasing focus on consistency, qualified status, standardized reporting, and dispute prevention. For MNE groups, the package should be viewed as more than a technical update: it may affect how groups assess jurisdictional risk, prepare GIR filings, evaluate covered taxes, and support reliance on QDMTT safe harbors.
Groups should use the coming months to reassess Pillar Two governance, data readiness, and documentation. In particular, taxpayers should monitor peer review developments, compare existing GIR processes against the updated return and forthcoming XML schema, review local tax regimes for explicitly conditional or potentially discriminatory features, and confirm that QDMTT safe harbor assumptions remain supportable under local law and OECD guidance.