New Organisation for Economic Co-operation and Development (OECD) rules on international tax have propelled Asia to the forefront of one of the most significant international tax reforms in decades. Businesses in the region will now have to get to grips with a major shift in compliance complexity.
‘It seems like the pioneers in the world at the moment are very much in the Asia Pacific region,’ said Adriana Calderon, director at Transfer Pricing Solutions Asia, speaking at the recent ACCA Technical Symposium 2025 in Singapore.
Multinationals can no longer simply delegate GMT compliance to their headquarters
New rules
The new OECD rules (known as the Global Anti-Base Erosion, or GloBE, rules) will create compliance obligations for multinational groups with consolidated revenue exceeding €750m in at least two out of the four years prior to the tested fiscal year. In-scope organisations will be expected to pay a minimum effective tax rate of 15%, known as the global minimum tax (GMT). The rules will also require the subsidiaries of multinationals to prepare and submit global income tax returns in each jurisdiction they operate in.
GMT is a component of Pillar Two of the OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 project. It uses three key mechanisms to facilitate accounting: a qualified domestic minimum top-up tax (QDMTT), an income inclusion rule (IIR) and an undertaxed profits rule (UPR).
In addition to GMT, Pillar Two includes a subject-to-tax rule, which allows jurisdictions to impose additional taxes of up to 9% on certain payments, such as interest or royalties, that multinationals based in one jurisdiction make to related entities in another.
Singapore has taken the lead in implementing both the QDMTT and IIR. This will enable the city-state to collect top-up taxes from both local and foreign subsidiaries of Singapore-based parent companies.
Following Singapore’s example, Hong Kong passed a bill in May 2025 to implement the GloBE rules under Pillar Two. Other Asia Pacific countries, including Australia, Thailand, Malaysia and Indonesia, have also legislated to incorporate the QDMTT, IIR and UPR into their tax rules.
Major repercussions
These developments have significant implications for multinationals operating in the region. According to Calderon, multinationals can no longer simply delegate GMT compliance to their headquarters. ‘A majority of countries that have gone ahead with BEPS 2.0 have made sure that they implement QDMTT and IIR so that they are able to collect from subsidiaries and from the head office,’ she explained.
As a result, businesses that are subsidiaries of significant multinationals must double-check their obligations at the country level. ‘The key here is that this calculation has to be done on a jurisdiction-by-jurisdiction level, and there have to be some adjustments,’ she added.
Companies are advised to start preparing for the new rules early, especially if they have numerous entities. ‘It will take some time to understand, particularly where you’re going to get information,’ Calderon said. While some information can be obtained from audited financial statements, other data may not be readily available, and businesses will need to allocate time to locate it.
Companies are contending with three distinct regulatory frameworks
Aside from gathering the necessary information, businesses must also double-check if they have de minimis exclusions and if these exclusions have been implemented in local jurisdictions, Calderon advised.
The combination of these requirements leaves companies facing overlapping compliance burdens across three distinct regulatory frameworks: global minimum tax, transfer pricing and tariffs. Each has its own objectives and methodologies, presenting unique challenges for tax professionals.
For example, entities whose profiles fulfil Pillar One’s Amount B – such as wholesale distributors and businesses with operating expenses between 3% and 20–30% of net revenues – can save time on external benchmarking analysis. However, they will still be required to prepare transfer pricing documentation. ‘You will still have to do the calculations and then show how these recommended operating margins are fulfilled,’ Calderon explained.
Transfer pricing
Despite the introduction of a GMT, Calderon said transfer pricing remains relevant. Some GMT adjustments, such as intercompany service fees, royalty payments and financing arrangements, will still require arm’s length pricing verification.
The GMT requires accurate allocation of income and taxes across jurisdictions. The process inherently relies on proper transfer pricing to determine which profits legitimately belong in each jurisdiction. Thus, companies cannot simply discard transfer pricing analysis in favour of GMT calculations. ‘At the end of the day, transfer pricing will still be there,’ Calderon said.
With most countries subject to a 10% minimum reciprocal baseline tariff from the US, businesses may find that tariffs eliminate their distribution margins entirely. They will therefore have to choose between supplier cost reductions, consumer price increases or cost-sharing arrangements.
‘Benchmarking will be critical to understand the impact of tariffs in the industry’
Dual compliance
Pillar One’s Amount B introduces a simplified, formulaic approach for calculating returns for limited-risk wholesale distributors, replacing traditional benchmarking studies with a pricing matrix. Alongside tariffs, Amount B has had an impact on transfer pricing, as businesses must comply with both customs value methodologies, creating dual compliance requirements.
Transfer pricing is also deeply interlinked with tariffs, as valuation duties are based on the evaluations, origins and classifications of a product. Businesses may not wish to set transfer prices too high, as the corresponding customs value will also increase. ‘But at the end of the day, it comes down to what type of business and supply chains have been set up,’ Calderon pointed out.
As companies negotiate pricing in their supply chains to split the cost of tariffs, benchmarking will remain key. ‘Benchmarking will be critical to understand the impact of tariffs in the industry as a whole and prove that margins will reduce,’ Calderon said. ‘If tariffs do affect your industry, it will become very clear in your benchmarking.’
