BEPS Pillar 2 Global Minimum Tax: How the 15% Top-Up Rules Reach Indian Multinationals This Year
Groups with revenue above €750 million face top-up taxes in low-tax jurisdictions from this year.
Key points
- Groups with consolidated revenue of €750 million or more must pay an effective rate of at least 15 per cent in every jurisdiction where the GloBE rules apply.
- India has not enacted the rules, so top-up tax on low-taxed Indian or offshore profits of Indian groups is collected by other countries.
- The first GloBE information returns fell due in 2026; transitional safe harbours end with fiscal years beginning in 2026.
NEW DELHI — The global minimum tax has arrived for Indian multinationals by the back door. India has not enacted the OECD's Pillar 2 rules, but more than sixty jurisdictions have, and for Indian-headquartered groups with revenue above €750 million the consequence is the same as if it had: a 15 per cent floor on the effective tax rate in every jurisdiction where they operate, enforced by top-up taxes collected in Singapore, Dubai, London or Luxembourg rather than New Delhi.
"The era of the zero-tax subsidiary is ending, one jurisdiction at a time," an international tax partner at a Mumbai firm told The Counsel.
What Pillar 2 is
Pillar 2 of the OECD/G20 Inclusive Framework's project on base erosion and profit shifting, agreed in October 2021, imposes through the Global Anti-Base Erosion (GloBE) Model Rules a minimum effective tax rate of 15 per cent on large multinational groups, computed jurisdiction by jurisdiction on a defined measure of accounting profit. Three mechanisms collect the top-up where the rate falls short:
- Qualified domestic minimum top-up tax (QDMTT). The low-tax jurisdiction itself charges the top-up on its own entities, keeping the revenue at home.
- Income inclusion rule (IIR). The ultimate parent entity's jurisdiction charges the parent the top-up on low-taxed profits of its subsidiaries, where no QDMTT has been paid.
- Undertaxed profits rule (UTPR). Where neither the parent nor the low-tax jurisdiction applies the rules, other jurisdictions in which the group has entities collect the top-up by denying deductions or imposing an equivalent charge.
The rules apply to groups with consolidated revenue of €750 million or more in at least two of the four preceding fiscal years. A substance-based income exclusion carves out a fixed return on payroll and tangible assets, and transitional safe harbours based on country-by-country reporting have allowed groups to avoid full computations for fiscal years beginning before 2027.
Where the rules are in force
| Jurisdictions | Status |
|---|---|
| European Union member states, United Kingdom, Japan, South Korea, Australia, Canada, Switzerland, Norway | IIR and domestic minimum tax from 2024; UTPR from 2025 in most |
| Singapore, United Arab Emirates, Hong Kong, Malaysia, Thailand, Indonesia | Domestic minimum tax and, in most, IIR from 2025 |
| United States | Not enacted; under a June 2025 understanding with the G7, US-parented groups are to be exempted from the IIR and UTPR in participating jurisdictions in return for US domestic rules |
| India, Mauritius, Cayman Islands, most of Africa and Latin America | Not enacted |
India's position
India has supported the two-pillar solution since 2021 and officials have repeatedly said that enabling provisions are under examination, but no income inclusion rule, undertaxed profits rule or domestic minimum tax has been enacted, and the Income-tax Act, 2025, in force since 1 April 2026, does not contain them. The government's stated reasoning is that India's headline rates — 25.17 per cent for most companies and 17.16 per cent for new manufacturing companies under the concessional regime — sit above the minimum, so the revenue at stake is small, while the compliance burden and the loss of discretion over incentives are real.
The arithmetic is not quite that simple. Units in the Gujarat International Finance Tec-City enjoying a ten-year tax holiday, companies within the patent-box regime taxed at 10 per cent, and legacy special economic zone units can all produce an Indian effective rate below 15 per cent for a group that is otherwise highly taxed. Without a domestic minimum tax, the top-up on those profits is collected by the parent's jurisdiction under its IIR, or by other jurisdictions under the UTPR, rather than by India.
How the rules reach Indian multinationals
- Indian-parented groups with offshore subsidiaries. A Singapore trading subsidiary, a Dubai holding company or a Dutch financing vehicle with an effective rate below 15 per cent now pays a domestic minimum top-up in those jurisdictions from 2025. Where the subsidiary sits in a jurisdiction without such a tax — Mauritius or the Cayman Islands, for example — the top-up is collected under the UTPR by the EU, UK or other jurisdictions where the group has entities, because India, as parent jurisdiction, has no IIR of its own.
- Foreign-parented groups with Indian subsidiaries. Where the Indian effective rate is below 15 per cent because of a holiday or concession, the parent's jurisdiction collects the top-up under its IIR. The benefit of the Indian incentive is transferred, in part, to a foreign treasury.
- Compliance regardless of liability. Every in-scope group must compute effective rates for every jurisdiction and file a GloBE information return; the first returns, for fiscal years beginning in 2024, fell due in mid-2026 under the extended first-year deadline. Indian groups file in the jurisdictions where the rules apply, and Indian entities must supply the data.
The era of the zero-tax subsidiary is ending, one jurisdiction at a time.
An international tax partner, to The Counsel
What Indian groups should be doing now
- Scope. Confirm whether consolidated revenue crosses €750 million in two of the last four years, counting acquisitions and disposals under the rules' aggregation provisions.
- Map effective rates. Compute GloBE income and covered taxes for every jurisdiction, including India, and identify where the rate falls below 15 per cent and why.
- Use the safe harbours while they last. The transitional country-by-country safe harbour and the transitional UTPR safe harbour reduce the computations for early years, but end with fiscal years beginning in 2026.
- Revisit structures. Entities in jurisdictions without a domestic minimum tax now attract UTPR exposure elsewhere; the question is no longer whether top-up is paid but to whom.
- Build the data. Deferred tax, push-down adjustments and entity-level accounting data that Indian groups have not previously collected are now required annually.
- Board reporting. Pillar 2 is a disclosed item in financial statements under the accounting standards' temporary exception, and auditors are asking for the analysis.
What comes next
Two developments will shape the next phase. The first is whether India enacts a domestic minimum tax to keep the top-up on its own incentive regimes at home, a decision that turns on the trade-off between revenue and the attractiveness of the incentives. The second is the fate of the June 2025 understanding on US-parented groups, which other jurisdictions are implementing through their own legislation and which, if it holds, will leave the global minimum tax applying unevenly between American and other multinationals — a difference Indian groups competing with both will feel directly.
What is Pillar 2 of BEPS?
The part of the OECD/G20 two-pillar solution that, through the GloBE Model Rules, imposes a 15 per cent minimum effective tax rate, jurisdiction by jurisdiction, on groups with consolidated revenue of €750 million or more, collected through a domestic minimum tax, an income inclusion rule or an undertaxed profits rule.
Has India implemented the global minimum tax?
No. India supports the solution and has examined enabling provisions, but has enacted none of the three rules, and the Income-tax Act, 2025 does not contain them. Indian groups are affected through the rules enacted abroad.
Which Indian companies are affected?
Indian-headquartered groups above the €750 million threshold with subsidiaries in jurisdictions applying the rules, and Indian subsidiaries of foreign groups of that size, where the effective rate in any jurisdiction — including India for entities with holidays or concessions — is below 15 per cent.
What is a qualified domestic minimum top-up tax?
A domestic tax on a jurisdiction's own low-taxed entities that brings their effective rate to 15 per cent, so the top-up is collected locally rather than by the parent's or other jurisdictions. Most European countries, Singapore, the UAE, Hong Kong and Malaysia have one; India does not.
The Counsel will report any move by the Union to enact enabling provisions. Groups near the revenue threshold should take advice from a qualified international tax adviser on scoping and on the safe harbours available for the current year.
This report is for general information only and does not constitute legal advice. Readers should consult a qualified lawyer about their own circumstances. Case citations are to The Counsel Reports (TCR) unless otherwise stated.