Multinationals preparing for the implementation of BEPS 2.0’s Pillar Two minimum global tax regime are increasingly treating it as a permanent shift in reporting and governance, as local filings, divergent domestic rules and audit-grade data and documentation all come under the spotlight.
BEPS 2.0 Pillar Two is the OECD/G20’s global anti-tax base erosion initiative. Directed at large multinational groups, it is structured as a jurisdictional top-up tax that applies an additional charge where a group’s effective tax rate in a certain jurisdiction falls below 15%, after a limited substance-based carve-out.
There is a wider trend towards a more connected exchange of tax data
In 2025, the OECD issued further updates to its BEPS Action 5 transparency framework on tax rulings. The changes included a revised exchange template, updated terms of reference, new peer reviews, updated XML standards and a user guide for automated data sharing.
Tougher treatment
While these revisions do not require a full rebuild of Pillar Two work – the core calculations remain unchanged – advisers say they underline a wider trend towards a more connected exchange of tax data and less tolerance for inconsistent, manual reporting.
‘The exchange of information return data under the GloBE [global anti-base erosion] rules aligns with global reporting standards, reinforcing the need for stronger tax governance,’ says Doris Wai Chi Chik, tax partner at Deloitte Hong Kong. ‘Organisations should ensure their reporting is accurate, structured and timely, not just for GloBE, but across evolving transparency obligations.’
Attention is also turning to the introduction of a ‘side-by-side agreement’ in January 2026, which exempts US-based multinationals from from certain Pillar Two mechanisms: the income inclusion rule and the undertaxed profits rules. This heightens the focus on domestic top-up tax compliance and jurisdiction-by-jurisdiction filing readiness.
‘As a result, we are seeing many organisations mobilise their local teams to prepare for domestic top-up tax filings and ensure readiness for jurisdiction-specific requirements,’ says Andy Baik, partner and co-head of KPMG Singapore’s BEPS centre of excellence.
There is still a gap between early modelling and live compliance
Compliance gap
Even so, advisers say there is still a gap between early modelling and live compliance. Domestic legislation variations can emerge in definitions, elections, covered taxes and the mechanics of qualified domestic minimum top-up taxes. This creates operational strain, especially where jurisdictions require different sources of financial information for domestic top-up calculations from what an ultimate parent entity uses in the group’s GloBE information return.
In Hong Kong SAR of China, for instance, structural issues can determine who must file and where. Carol Lam, director and head of tax at BDO Hong Kong, points out that for Hong Kong SAR constituent entities, the compliance experience can differ depending on whether the ultimate parent is in a jurisdiction that has already adopted Pillar Two. Intermediate holding structures, particularly those used by large Chinese groups, can raise the risk that a Hong Kong SAR entity may have to coordinate or even lodge filings locally.
Advisers also warn that the technical mechanics are still underestimated. Wilson Cheng FCCA, tax leader at EY Hong Kong and Macau, says high-level impact assessments often apply a 15% rate to a rough profit number but that real implementation is far more demanding.
‘The calculations for the substance-based income exclusion – requiring granular payroll and tangible asset data by entity – and the intricate rules around foreign currency translation have proven far more difficult than anticipated,’ Cheng says.
Country-by-country reporting may not produce clean enough GloBE inputs
Data pain
Data readiness is the biggest burden, according to advisers. Existing ERP and finance systems were built for commercial reporting, not for the bottom-up precision required by GloBE filing.
Common pain points include deferred tax tracking at the required level of detail, and bridging from accounting profit to GloBE income, where adjustments are complex or dispersed.
Chan Xue Pei, tax partner at Forvis Mazars in Singapore, says businesses can adapt by accelerating data mapping and system readiness while aligning local reporting with OECD-compliant templates. Staff training, early gap assessments and a centralised governance model can also help prevent fragmentation when local entities interpret the rules in isolation. ‘By establishing a single source of truth now, late movers can ensure their reporting framework is robust before full-scale implementation,’ Chan says.
Materiality judgments may shift under Pillar Two
As Pillar Two becomes statutory in more places, advisers say documentation expectations are rising quickly, even without a single global audit framework dedicated to Pillar Two.
Shalini Sathiveil, tax director at PwC Malaysia, says materiality judgments may shift under Pillar Two. A subsidiary that is immaterial for group financial reporting can still be material from a minimum-tax risk perspective – for example, if it operates in a low-tax jurisdiction or benefits from incentives that could trigger top-up tax.
Jurisdiction-sensitive
PwC also expects early enforcement to vary by jurisdiction, with some authorities potentially taking a transitional, educative approach as systems and interpretations mature. Auditors may also have to review tax computations on a jurisdictional basis, which can impact how group and component auditors test controls, data quality and calculations.
‘Group auditors tend to focus on understanding internal controls relevant to Pillar Two reporting to identify and assess risks of material misstatement, while component auditors often take a more conservative approach by testing calculations and assumptions for accuracy and completeness,’ Sathiveil says.
