The Multinational Top-up Tax (Pillar Two Territories, Qualifying Domestic Top-up Taxes and Accredited Qualifying Domestic Top-up Taxes) Regulations 2025
The Multinational Top-up Tax Regulations 2025, effective April 21, 2025, specify territories and domestic taxes aligning with the OECD/G20 Pillar Two model rules.
These rules aim to ensure multinational corporations pay a minimum level of tax, preventing tax avoidance and promoting a fairer system.
The regulations list specific territories and taxes as ‘Pillar Two territories’ and ‘qualifying domestic top-up taxes’ effective from various dates in late 2023 and early 2024, also allowing HMRC to specify additional entities through notice publication.
Arguments For
Implementation of International Tax Agreement: These regulations implement the OECD/G20 Inclusive Framework's Pillar Two model rules, aiming to prevent multinational corporations from avoiding taxes by shifting profits to low-tax jurisdictions.
Fairer Tax System: The regulations promote a fairer tax system by ensuring that multinational corporations pay a minimum level of tax, regardless of where they choose to book their profits.
Increased Government Revenue: Increased tax revenue from multinational corporations can fund public services and reduce the national debt.
Level Playing Field for Businesses: These regulations create a level playing field for businesses by applying a minimum tax to all multinational companies, preventing unfair competition from those who currently avoid this tax.
Arguments Against
Administrative Burden: Implementing and enforcing these regulations could place an administrative burden on both businesses and tax authorities.
Potential Negative Impact on Foreign Investment: Some argue that higher tax rates could discourage foreign investment in the UK.
Complexity and Uncertainty: The complexity of the Pillar Two rules could lead to uncertainty and compliance challenges for businesses.
Double Taxation: There’s a potential for double taxation if a company already pays taxes in other countries at a higher effective rate than the minimum outlined here.
- Citation, commencement and effect (1) These Regulations may be cited as the Multinational Top-up Tax (Pillar Two Territories, Qualifying Domestic Top-up Taxes and Accredited Qualifying Domestic Top-up Taxes) Regulations 2025 and come into force on 21st April 2025. (2) These Regulations have effect for accounting periods beginning on or after 31st December 2023.
These regulations are officially titled the Multinational Top-up Tax Regulations 2025.
They are effective from April 21, 2025, and apply to financial periods starting on or after December 31, 2023.
- Pillar Two territories (1) The territories set out in Schedule 1 are specified as Pillar Two territories with effect on and after the respective dates listed in the table. (2) A territory is also a Pillar Two territory if it is specified as such in a notice published by the Commissioners for His Majesty’s Revenue and Customs.
Schedule 1 lists the territories designated as 'Pillar Two territories,' effective from the dates shown.
HMRC notices can also add territories to this list.
- Qualifying domestic top-up taxes (1) A Qualified Domestic Minimum Top-up Tax for the purposes of the Pillar Two rules that is charged by the territory listed, and under the legislation set out, in Schedule 2 is specified as a qualifying domestic top-up tax with effect on or after the respective date listed in the table. (2) A Qualified Domestic Minimum Top-up Tax is also a qualifying domestic top-up tax if it is specified as such in a notice published by the Commissioners for His Majesty’s Revenue and Customs.
Schedule 2 details the specific taxes that qualify as 'qualifying domestic top-up taxes,' based on the charging territory and legislation.
HMRC can add further taxes to this list through notices.
- Accredited qualifying domestic top-up taxes (1) A Qualified Domestic Minimum Top-up Tax for the purpose of the Pillar Two rules that is charged by the territory listed, and under the legislation set out, in Schedule 3 is specified as an accredited qualifying domestic top-up tax with effect on or after the respective date listed in the table. (2) A Qualified Domestic Minimum Top-up Tax is also an accredited qualifying domestic top-up tax if it is specified as such in a notice published by the Commissioners for His Majesty’s Revenue and Customs.
Schedule 3 identifies 'accredited qualifying domestic top-up taxes,' as defined by the Pillar Two rules, effective from the dates indicated.
HMRC can designate additional taxes via notice.
Schedule 1 Pillar Two Territories Regulation 2 [Table listing territories and effective dates]
This schedule provides a list of territories that are considered ‘Pillar Two territories’ under this legislation, along with the date each territory's designation becomes effective.
Schedule 2 Qualifying Domestic Top-up Taxes Regulation 3 [Table listing territories, legislation, and effective dates]
This schedule lists taxes that are classified as 'qualifying domestic top-up taxes,' specifying the relevant territory and legislation for each tax and its effective date.
Schedule 3 Accredited Qualifying Domestic Top-up Taxes Regulation 4 [Table listing territories, legislation, and effective dates]
This schedule lists the 'accredited qualifying domestic top-up taxes' – a subset of qualifying domestic top-up taxes, with associated territories, legislation, and effective dates.
Explanatory Note (This note is not part of the Regulations) These Regulations specify territories as Pillar Two territories, and taxes as qualifying domestic top-up taxes and accredited qualifying domestic top-up taxes, in support of the implementation and operation of the Organisation for Economic Co-operation and Development/G20 Inclusive Framework’s Pillar Two model rules. Regulations 2, 3, and 4 have effect from a date before these Regulations commence. This is authorised by sections 241(3), 256(4) of, and paragraph 2(1C) of Schedule 16A to, the Finance (No. 2) Act 2023. Regulations 2, 3, and 4 give effect to the Schedules which provide as follows: • The table in Schedule 1 lists territories specified as Pillar Two territories along with the date from which they are specified as such, • The table in Schedule 2 lists the taxes specified as qualifying domestic top-up taxes along with the date from which they are specified as such, and • The table in Schedule 3 lists the qualifying domestic top-up taxes that are accredited for the purposes of an election in accordance with Schedule 16A to the 2023 Act along with the date from which they are so accredited. Regulations 2, 3 and 4 also provide for Commissioners for His Majesty’s Revenue and Customs to specify further territories as Pillar Two territories, and taxes as qualifying domestic top-up taxes and accredited qualifying domestic top-up taxes, by way of notice. Public notices made under this instrument will be published on the website at https://www.gov.uk/government/collections/multinational-top-up-tax-and-domestic-top-up-tax. Copies of the taxes specified in Schedule 2 and 3 are available for inspection in hard copy from 100 Parliament Street, London SW1A 2BQ and in electronic copy on request by emailing: [email protected]. A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.
The explanatory note clarifies the regulations' purpose, which is to implement the OECD/G20 Pillar Two model rules on global minimum corporate tax.
It explains that Sections 2,3, and 4 have retroactive effect, authorized by prior legislation.
It summarizes the content of Schedules 1, 2 & 3.
The note details how HMRC will announce additional territories and taxes, and how to access further details on the government website.