The OECD’s ambitious Pillar 2 project, designed to impose a global minimum effective tax rate of 15% on large multinational groups, has been making headlines (and headaches) for years now. But after multiple rounds of consultation, draft legislation, and frantic modelling – the big question today is: will it ever actually happen?
Let’s take a quick look at what Pillar 2 is supposed to do, and why its future suddenly looks a little shaky.
Quick recap: What is Pillar 2 again?
Pillar 2 is part of the OECD’s two-pillar solution to address base erosion and profit shifting (BEPS). The goal of Pillar 2 is to ensure that large multinational enterprises (with global revenues over €750 million) pay at least 15% tax in every jurisdiction where they operate.
The mechanism involves three main elements:
- The Income Inclusion Rule (IIR), which requires parent companies to top up tax if subsidiaries pay below 15% in a given jurisdiction.
- The Undertaxed Profits Rule (UTPR), which applies if the parent jurisdiction does not implement the IIR.
- The Qualified Domestic Minimum Top-Up Tax (QDMTT), which allows a jurisdiction to “top up” low-tax profits locally before other countries do.
In theory, it’s a coordinated global shift in taxing rights. In practice, it’s extremely complex to implement – and the rollout has been anything but smooth.
So, what’s going on now?
In recent months, several countries have backed away from implementing Pillar 2, creating uncertainty around its future:
- Australia, Canada and Japan are delaying or reconsidering their rules citing pressure from business and the potential negative impacts on investment
- The United States has made no effort to align fully with the OECD model and shows little political will to do so. A G7 agreement in June 2025 proposed a “side-by-side” system that would exempt U.S.-parented groups from the IIR and UTPR, recognizing GILTI as a domestic minimum tax.
- Belgium has recently become the focus of pillar 2 controversy. A coalition of U.S. business groups is arguing that the UTPR unfairly taxes Belgian entities for profits earned by foreign affiliates especially when those profits have no direct link to Belgium. If successful a ruling could invalidate the UTPR across all EU member states, which would be a seismic shift for Pillar 2 compliance.
What does this mean for multinationals?
Multinational groups have spent significant time and resources preparing for Pillar 2, but with inconsistent implementation around the world, there are real risks of:
- Double taxation, where one country applies rules and another does not.
- Increased uncertainty around deferred tax treatment, safe harbour rules, and reporting standards.
- Complex compliance obligations, particularly in jurisdictions where QDMTT is proceeding (notably across the EU).
What does this mean for South Africa?
South Africa finds itself in a delicate position amid the global uncertainty surrounding Pillar 2. While it has formally enacted legislation to implement the OECD’s Global Minimum Tax framework, the fragmented rollout elsewhere introduces both risks and opportunities. It is to be noted that South Africa opted out of the UTPR which appears to be the centre of the controversy internationally.
Risk of Lost Revenue
- If other jurisdictions delay or abandon Pillar 2, South Africa may lose out on top-up tax it could otherwise collect under the QDMTT. For example, profits taxed below 15% in South Africa could be taxed elsewhere if SA doesn’t act first
Compliance Burden for MNEs
- Multinationals operating in South Africa must still prepare GloBE Information Returns, even if their global group isn’t fully subject to Pillar 2 due to delays in other countries.
Competitive Pressure
- South African entities are at a disadvantage if they face stricter compliance or higher effective tax rates.
Legal & Political Risk
- As a result of Belgium’s legal challenge, South Africa may hesitate to enforce rules that could later be invalidated or revised
In short, global momentum is slowing, and many multinationals are questioning whether to continue investing in compliance systems or pause and reassess.
Our take
Pillar 2 is not dead, but it’s limping. The dream of a truly “global” minimum tax is looking increasingly unlikely in the short term.
That said, many countries – particularly in the EU – are continuing with implementation, so multinationals still need to stay alert. For Africa-focused businesses, adoption will likely be slower, but the risk of exposure elsewhere remains.
As always, we’re here to help you navigate the uncertainty.
Need help modelling Pillar 2 risks or planning for local implementation? Reach out to us today to discuss.
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