Pillar two tax registration explained

Groups within the scope of pillar two must register with HMRC within six months after the end of the first accounting period to begin on or after 31 December 2023.

Pillar two is part of a package of initiatives agreed at OECD level by territories worldwide to tackle the challenges of taxing multinational enterprises (MNEs) cross-border. In the UK, it will be known as the multinational top-up tax (MTT) and domestic top-up tax (DTT) . The purpose is to reduce the ability for MNEs to shift profits across their various entities and the territories they operate in to minimise their worldwide tax liabilities, focused on defining where profits should be recognised by MNEs around the world and ensuring that at least a minimum amount of tax is paid in the territories in which they operate. This led to the drafting of pillars one and two, which were endorsed by the G20 finance ministers in July 2021.

Pillar one is all about redistributing the taxation of profits derived by very large multinational groups among the territories it operates in to better reflect its market jurisdictions.

Pillar two is about increasing the tax payable by large groups where the amount paid within particular territories falls below a defined minimum effective tax rate (ETR) (15%). It is important to recognise that the ETR is calculated based on the pillar two rules and is not necessarily the same as the nominal tax rate in the country concerned.

Practical Guidance:

There are two Pillar 2 top-up taxes in the UK:

• Domestic Top-up Tax (DTT)
• Multinational Top-up Tax (MTT)

Groups must register with HMRC within 6 months of the end of the first accounting period that started on or after 31 December 2023 which makes them subject to the rules. For example, the registration deadline is 30 June 2025 for an accounting period which began on 1 January 2024.

Groups that have entities located in the UK and other jurisdictions must register to report for both Domestic Top-up Tax and Multinational Top-up Tax.

Groups that only have entities located in the UK must register to report for Domestic Top-up Tax. If your group has entities located both inside and outside the UK, you must register to report for both Pillar 2 top-up taxes.

If you are a group or single entity who:

• has at least 1 entity located in the UK
• has made consolidated group annual revenues of €750 million or more within 2 of the last 4 accounting periods

Then you must use the online service to register and report for Pillar 2 top-up taxes in the UK.

Only the filing member for the group can use the online service. This will be the ultimate parent entity (UPE) by default, but the UPE can nominate another group entity as the filing member.

The filing member does not need to be UK resident. However, if the filing member is not UK resident HMRC will not be able to automatically exchange any Globe Information Return (GIR).

Further details can be obtained from the HMRC using the link below:

https://www.gov.uk/government/publications/pillar-2-top-up-taxes-registration-notice-1

To discuss this further, please do not hesitate to reach out to our tax team.