Pillar Two Top-Up Tax: Compliance for Groups Subject to the 15% Global Minimum

Pillar Two — the OECD/G20 Global Anti-Base Erosion (GloBE) Rules — requires multinational enterprise groups with consolidated revenues of €750M or more in at least 2 of the 4 preceding fiscal years to pay a minimum effective tax rate (ETR) of 15% in every jurisdiction where they operate. Spain transposed Pillar Two via Ley 7/2024 (20 December 2024), implementing Directive 2022/2523/EU. The three top-up tax rules — IIR (Income Inclusion Rule, applied at the parent entity level), UTPR (Undertaxed Profits Rule, backstop), and QDMTT (Qualified Domestic Minimum Top-up Tax, Spain's domestic implementation) — interact to ensure that any income taxed below 15% in any jurisdiction triggers a top-up payment somewhere in the group structure. Three new Spanish returns are required under Orden HAC/1198/2025: Modelo 242 (prior notification), Modelo 241 (GloBE information return), and Modelo 240 (top-up tax self-assessment). For groups with a December fiscal year-end, the first deadlines for the 2024 year fall in April–July 2026 under an 18-month extended first-year deadline. The CbCR transitional safe harbour (2024–2026) can significantly reduce compliance work for jurisdictions where the ETR is comfortably above 15%.

We advise multinational groups on their full Pillar Two compliance obligations under Ley 7/2024 — from the initial scope and exposure assessment through GloBE Income calculation, safe harbour analysis, QDMTT and IIR quantification, and the filing of all three Spanish Pillar Two returns.

Why Pillar Two is the Most Significant New Compliance Obligation for Multinational Groups Since Transfer Pricing

Pillar Two introduces a fundamentally new layer of international tax compliance: per-jurisdiction ETR calculation, a new definition of taxable income (GloBE Income) that differs from both local GAAP and CIT base, and three interacting top-up mechanisms that must be applied in a specific priority order. For groups accustomed to managing compliance on a jurisdiction-by-jurisdiction basis, the Pillar Two framework requires a coordinated global approach to data collection, calculation, and disclosure.

The GloBE Income calculation requires significant book income adjustments — for deferred taxes, specific items excluded from or added to the GloBE base, and the SBIE (substance-based income exclusion based on payroll and tangible asset values). The covered taxes calculation requires identification of all taxes that qualify as covered taxes for Pillar Two purposes — CIT, QDMTT from other jurisdictions, and some withholding taxes — and their adjustment for deferred tax movements. The interaction of these calculations across multiple jurisdictions produces an ETR for each jurisdiction that may differ significantly from the apparent local tax rate.

The Spanish QDMTT is particularly important for groups with Spanish constituent entities that benefit from significant CIT deductions (R&D credits, accelerated depreciation, ZEC rate, etc.) that could push their Spanish ETR below 15%. The QDMTT ensures Spain collects the top-up domestically rather than allowing it to be collected by the foreign parent via the IIR.

Our Advisory Process for Pillar Two Compliance Under Ley 7/2024

Our engagement begins with a scoping and triage exercise: confirming the €750M threshold, mapping all constituent entities, and running a first-pass ETR estimate by jurisdiction using CbCR data and the simplified CbCR safe harbour tests. The safe harbour assessment is the highest-value early activity — it identifies the jurisdictions where a full GloBE calculation can be avoided and focuses the detailed compliance work on the jurisdictions where the ETR is below or close to 15%.

For jurisdictions requiring full GloBE calculation (typically those with significant tax incentives, tax havens, or structurally low-tax environments), we build the GloBE Income and covered taxes calculation from the group’s financial data, applying all required adjustments and the SBIE. We produce per-entity and per-jurisdiction ETR computations and identify top-up tax amounts by rule (QDMTT, IIR, UTPR).

For Modelo filing, we prepare all data required for Modelo 241 (the detailed GloBE information return), Modelo 240 (the top-up tax self-assessment), and Modelo 242 (the prior notification). We coordinate with the group’s global Pillar Two team to ensure consistency of the Spanish filing with the group’s GloBE information returns in other jurisdictions.

Regulatory Framework: Directive 2022/2523, Ley 7/2024 and Orden HAC/1198/2025

Directive 2022/2523/EU (15 December 2022) establishes the EU framework for Pillar Two, implementing the OECD GloBE Rules and the QDMTT concept. Ley 7/2024 (20 December 2024) transposes Directive 2022/2523 into Spanish law, establishing the IIR, UTPR, and QDMTT obligations for in-scope Spanish groups. Orden HAC/1198/2025 establishes the three compliance forms (Modelo 242, Modelo 241, Modelo 240) and their deadlines. The OECD/Inclusive Framework CbCR safe harbour guidance (December 2022 and subsequent technical notes) establishes the transitional safe harbour conditions applicable for 2024–2026.

The SBIE transition rates are: 10% payroll + 10% tangible assets (2023–2024), reducing to 7.5% + 7.5% (2025–2026), 5% + 5% (from 2033). For the 2024 fiscal year (the first compliance year for most groups), the 10% rates apply, providing a materially larger exclusion than the steady-state 5% rate.

Real Results in Pillar Two Compliance for In-Scope Multinational Groups

• Scope assessments confirming €750M threshold status and identifying in-scope and out-of-scope constituent entities.
• CbCR safe harbour triage that identified three jurisdictions out of twelve as requiring full GloBE calculation, dramatically reducing first-year compliance complexity.
• Spanish QDMTT analysis for constituent entities with R&D deductions and ZEC rate, identifying top-up obligations and coordinating with the group’s global Pillar Two position.
• Modelo 242 notification filings managed within the 6-month deadline for the 2024 first compliance year.
• Modelo 241 and Modelo 240 data preparation for the April–July 2026 deadline under the 18-month first-year extension.