What Is the Global Minimum Tax?
Global Minimum Tax is an international corporate tax framework under which large multinational groups owe top-up tax on profits taxed below an agreed minimum rate.
Also known as: Pillar Two Minimum Tax, GloBE Rules.
How Global Minimum Tax works
Global Minimum Tax refers to the OECD/G20 Pillar Two model rules, implemented in the European Union by Council Directive (EU) 2022/2523, which apply to multinational and large domestic groups with consolidated revenue of at least 750 million euros in at least two of the four preceding fiscal years. Each group's effective tax rate is calculated jurisdiction by jurisdiction and compared with a minimum rate of 15 percent, and any shortfall becomes top-up tax. The income inclusion rule charges top-up tax at parent level, the undertaxed profit rule serves as a backstop, and many countries add a domestic top-up tax to collect the shortfall locally. Implementation dates, safe harbours and coordination with other regimes vary by country.
Global Minimum Tax vs Pillar One
Unlike Pillar One, which reallocates part of the taxing rights over the largest multinationals' profits to market countries, Global Minimum Tax sets a floor on the effective tax rate paid on profits wherever they are booked.
Example
Illustrative example: A group with consolidated revenue above the 750-million-euro threshold (illustrative, per the EU directive) has a subsidiary in Country B taxed below 15 percent. Country B may levy a domestic top-up tax; otherwise the parent's Country A generally applies the income inclusion rule to collect the difference. A freelancer running a one-person company in Country B is generally unaffected because the revenue threshold is not met.
Common misconception
Myth: The global minimum tax means every company now pays at least 15 percent.
Reality: Global Minimum Tax rules generally apply only to groups meeting the 750-million-euro revenue threshold, so most small companies and solo businesses remain taxed under ordinary national rules.
Frequently asked questions
Does the global minimum tax apply to small businesses?
Global Minimum Tax rules under Directive (EU) 2022/2523 apply to groups with consolidated revenue of at least 750 million euros in at least two of the four preceding fiscal years, so small businesses are generally outside scope.
What is the global minimum tax rate?
Global Minimum Tax rules set a minimum effective tax rate of 15 percent, measured per jurisdiction, with any shortfall collected as top-up tax under the income inclusion rule, the undertaxed profit rule or a domestic top-up tax.
Related terms
- Pillar Two — OECD workstream containing the global minimum tax rules
- Top-Up Tax — Charge collecting the shortfall below 15 percent
- Undertaxed Payment Rule (UTPR) — Backstop rule when parent-level collection fails
- Pillar One — Separate workstream reallocating taxing rights to markets
- Base Erosion and Profit Shifting (BEPS) — OECD project from which Pillar Two emerged
- Base Erosion and Anti-Abuse Tax (BEAT) — US minimum tax on base-eroding payments, compared with Pillar Two
Related guides
- Global tax reform and US digital nomads — Global tax reform from a nomad perspective
Sources
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
