Tax Insights: Canada releases Global Minimum Tax Act

June 21, 2024

Issue 2023-22R

June 21, 2024 update: On June 20, 2024, federal Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024, received royal assent. Bill C-69 includes the legislation to implement the “Pillar Two” global minimum tax regime in Canada. The legislation had previously been released in draft on August 4, 2023 (as discussed in our August 15, 2023 Tax Insights below).

Key changes in Bill C-69 (as compared to the August 4, 2023 draft legislation) relating to global minimum tax include:

  • introducing hybrid arbitrage arrangement rules, which can deny deductions for purposes of applying the transitional country-by-country safe harbour
  • providing rules relating to the treatment of marketable transferable tax credits
  • updating certain definitions within the Global Minimum Tax Act to better align with the Organisation for Economic Co-operation and Development (OECD) model rules*

Now that Bill C-69 has been enacted, the global minimum tax regime will apply in Canada with respect to the Income Inclusion Rule and domestic minimum top-up tax, effective for fiscal years of a qualifying multinational group that begin after December 30, 2023 (i.e. 2024 and later for calendar year taxpayers).

The remainder of this Tax Insights was published on August 15, 2023. It has not been altered to reflect the enactment of Bill C-69.


*     For more information on the Pillar Two model rules, see our Tax Policy Alerts at

- “OECD releases Pillar Two GloBE Consolidated Commentary & Examples” – for consolidated commentary published by the OECD on April 25, 2024 that incorporates all administrative guidance that has been released by the Inclusive Framework from March 2022 to December 2023

- “OECD releases guidance relating to Pillar Two GloBE and Pillar One Amount B"– for new commentary published by the OECD on June 17, 2024 (the legislation in Bill C-69 may not reflect certain aspects of this recently released administrative guidance) 

In brief

On August 4, 2023, Canada released draft legislation to implement the “Pillar Two” global minimum tax regime developed by the Organisation for Economic Co‑operation and Development (OECD)/G-20 Inclusive Framework on Base Erosion and Profit Shifting. This regime will generally apply to multinational groups (MNE groups) with consolidated revenue of at least €750 million. These MNE groups will be required to compute their effective tax rate (ETR) in each country where they have a subsidiary or permanent establishment. If the ETR for a particular country is below 15%, a top-up tax will be imposed to raise that ETR to 15% (this top-up tax may be reduced by a substance-based income exclusion, which is computed based on the payroll costs and net book value of tangible assets located in the jurisdiction). The ETR calculation is generally based on financial statement information, but includes many adjustments.

The OECD has released model rules to implement Pillar Two, as well as commentary and administrative guidance on those rules (the OECD commentary). Participating countries must each introduce domestic tax legislation based on the model rules for Pillar Two to take effect in those countries.

Canada has released its draft Pillar Two implementing legislation as a new act, called the Global Minimum Tax Act (GMTA). The GMTA is generally aligned with the model rules and OECD commentary. To ensure consistency, the GMTA includes a provision stating that this legislation is to be interpreted consistently with the model rules, the OECD commentary and future guidance released by the OECD. However, the structure and drafting of the GMTA differs from the model rules in many respects, so a careful review of the draft legislation is warranted to confirm how the GMTA will apply to MNE groups.

A public consultation on the draft legislation is open until September 29, 2023.

In detail


Under the OECD’s model rules, the new top‑up tax will be collected under one of three charging rules:

  • The Income Inclusion Rule (IIR) generally requires the ultimate parent entity (UPE) of the MNE group to pay the top‑up tax computed for its foreign subsidiaries (and can also apply to other types of “relevant parent entities” in certain other circumstances).
  • The Undertaxed Profits Rule (UTPR) is a residual rule, which collects top‑up tax that is not otherwise collected under other rules. This residual top‑up tax is allocated amongst all countries in which the MNE group operates (and which have adopted the UTPR), based on the group’s employees and tangible assets in those countries.
  • A country may also choose to adopt a Qualified Domestic Minimum Top‑up Tax (QDMTT), which collects top‑up tax on the income of entities located in that country (rather than allowing foreign countries to collect this tax under the IIR or UTPR).

The GMTA includes an IIR and domestic minimum top-up tax (DMTT), which will apply to Canadian entities of MNE groups that are within the scope of the Pillar Two rules. The IIR generally applies to a Canadian entity that is the UPE (or other relevant parent entity) of a qualifying MNE group, when the group has an ETR below 15% in a foreign jurisdiction. The DMTT generally applies to Canadian entities of a qualifying MNE group, when the group’s Canadian ETR is below 15%. In cases where the Canadian entity that has an IIR or DMTT amount is a partnership, the top-up tax computed at the partnership level is generally paid by the partners, in proportion to their allocable shares of the partnership income.

The draft legislation includes a placeholder for a UTPR, but does not include actual UTPR legislation. According to the Canadian federal budget released on March 28, 2023, Canada intends to release draft legislation for a UTPR at a later date. The IIR and DMTT will apply to fiscal years of a qualifying MNE group that begin after December 30, 2023 (i.e. 2024 and later for calendar year taxpayers), while the UTPR is expected to apply to fiscal years of a qualifying MNE group that begin after December 30, 2024 (i.e. 2025 and later for calendar year taxpayers). This is consistent with the timeline adopted by most participating countries.

Notably, the package of proposed legislation released on August 4 does not include consequential amendments to other Canadian tax legislation to address interaction with the GMTA, such as the following:

  • consequential amendments to Canada’s existing international tax rules (e.g. the rules for foreign accrual property income and foreign affiliate surplus computations) to address Pillar Two taxes
  • the allocation of top-up taxes between the federal and provincial governments
  • guidance on what Canadian tax incentives will constitute Qualified Refundable Tax Credits under the Pillar Two rules (or whether any tax incentives may be modified in response to Pillar Two)

We understand that legislation dealing with the impact of Pillar Two on existing tax rules will be released in the coming months. However, the GMTA does include a provision indicating that the general anti-avoidance rule (GAAR) in section 245 of the Income Tax Act will apply to amounts determined under the GMTA (with such modifications as the circumstances require).

Safe harbours

The OECD guidance includes certain safe harbours, which provide temporary and permanent exemptions from the Pillar Two rules. These safe harbours are generally replicated in the GMTA.

Transitional country‑by‑country reporting (CbCR) safe harbour

The GMTA includes a transitional CbCR safe harbour, which is consistent with the safe harbour rules1 outlined in the December 20, 2022 report of the Inclusive Framework published by the OECD. This safe harbour applies to an MNE group for a particular jurisdiction, if the group makes an election and satisfies one of the three tests listed below for that jurisdiction:

  • De minimis threshold test – the MNE group must have less than €10 million revenues and €1 million pre‑tax profits for the jurisdiction
  • ETR test – the MNE group’s ETR for the jurisdiction must be, if the relevant fiscal year begins:
    • before January 1, 2025, at least 15%
    • in 2025, at least 16%, or
    • after December 31, 2025, at least 17%
  • Routine profits test – the MNE group’s pre‑tax profit for the jurisdiction cannot exceed its substance‑based income exclusion for the jurisdiction

These tests are generally computed using data from qualifying CbCR, rather than full Pillar Two calculations. If a MNE group qualifies for the safe harbour in a jurisdiction, the top‑up tax for the jurisdiction is deemed to be nil and reduced disclosure will be required. The transitional safe harbour will be available for fiscal years beginning before January 1, 2027 and ending before July 1, 2028 (i.e. 2024 to 2027 for calendar year taxpayers).

Permanent QDMTT safe harbour

The GMTA also includes a permanent QDMTT safe harbour, which is consistent with the QDMTT safe harbour2 introduced in the OECD administrative guidance released on July 17, 2023. This safe harbour generally applies to an electing MNE group for a particular jurisdiction, if that jurisdiction has a DMTT that is considered acceptable by the OECD/G‑20 Inclusive Framework (i.e. a DMTT that is consistent with the model rules and OECD commentary is applied using an acceptable accounting standard and is administered in an acceptable manner). When the QDMTT safe harbour applies to an MNE group for a jurisdiction, the top‑up tax for the group entities in that jurisdiction is deemed to be nil. The QDMTT safe harbour, when applicable, eliminates the need for an MNE group to undertake a second calculation of top‑up tax under the Pillar Two rules.

Domestic minimum top-up tax

The DMTT is designed to qualify for the status of a QDMTT as determined by the Inclusive Framework. The DMTT generally applies to Canadian entities of an MNE group that is within the scope of Pillar Two, when the group’s Canadian ETR is below 15% (in other words, the DMTT is computed at the jurisdictional level and not on an entity by entity basis). Unlike the domestic minimum taxes that have been introduced by some European countries, the DMTT does not apply to groups that are non-multinational (i.e. entirely Canadian). The DMTT is intended to qualify for the QDMTT safe harbour (i.e. so that Canadian members of MNE groups will be exempt from the IIRs and UTPRs of foreign countries), and is meant to be interpreted consistently with the requirements outlined in the OECD guidance.

The DMTT includes an exemption for MNE groups that are in the initial phase of their international activities. This exemption is available for up to five years, for an MNE group that is:

  • located in no more than six jurisdictions, and
  • holds no more than €50 million of net book value of tangible assets outside of its largest jurisdiction

However, this exemption is not applicable where a relevant parent entity of the MNE group directly or indirectly owns Canadian entities of the group and is subject to a qualified IIR in a foreign jurisdiction (in other words, this exemption is not available where the top-up tax of the Canadian entities would otherwise be collected under a foreign IIR).

Administration and enforcement

The GMTA includes detailed administrative and enforcement rules with stringent record keeping and filing requirements. These rules are similar to the administration and enforcement provisions in the Income Tax Act, but go beyond those provisions in certain respects.

Filing obligations

The OECD has developed a standardized GloBE Information Return (GIR).3 The UPE of an MNE group (or another designated filing entity chosen by the group) can generally file this return on behalf of the group. The GIR does not need to be filed in Canada, if the UPE (or designated filing entity) files the form in the foreign jurisdiction where it is located, and that jurisdiction has a qualifying competent authority agreement with Canada (which provides for the automatic exchange of these returns), although a Canadian notification must be filed in these circumstances. In other cases, the return must be filed in Canada (e.g. if the UPE or designated filing entity is located in Canada, or if there is no qualifying competent authority agreement with the relevant foreign jurisdiction). The return is due within 15 months of the end of the relevant fiscal year (or 18 months for the first year in which the MNE group is subject to the GMTA). In addition, an entity that is liable to pay tax in Canada under the IIR or DMTT must file a separate return, which has the same due date as the GIR.

An entity must keep adequate records to determine whether they have complied with the GMTA for a period of eight years. The Canadian government reserves the right to specify the form that a record is to take and any information that the record must contain.


There are significant penalties that may apply if an MNE group fails to comply with its obligations under the GMTA. However, transitional penalty relief may be available in certain circumstances.



Failure to file:

  • a GIR 
  • in the opinion of the Minister, a complete or substantially complete GIR
  • a notification when the GIR return is filed by a qualifying foreign entity


x the number of complete months, not exceeding 40, from the GIR due date to the day on which the GIR is filed or the notification is made

Failure to file an IIR or DMTT return

5% of the tax payable that was unpaid when the return was due

+ (1% of the tax payable that was unpaid when the return was due x the number of complete months, not exceeding 12, from the day on which the return was required to be filed to the day on which the return is filed)

Additional penalties may be imposed for repeated failure to file, false statements or omissions, and failure to provide the required information. Further, when an assessment is appealed to the Tax Court of Canada, and the Court determines that there were no reasonable grounds for the appeal, the Court may impose a penalty of up to 10% of the amount in dispute.

The takeaway

While the GMTA is generally aligned with the Pillar Two model rules, a careful review of the draft legislation is required to assess its application to Canadian entities of in-scope MNE groups. The draft legislation confirms that the Canadian IIR and DMTT will apply for fiscal years of MNE groups beginning after December 30, 2023. Since this implementation date is fast approaching, MNE groups should take action now to analyze the potential impact of the GMTA, and to consider whether their current data, systems, technology and processes can support the requirements of the new legislation.

Interested parties should consider making a submission to the Department of Finance by the September 29, 2023 deadline.


1. For more information, see our Tax Policy Alert “OECD releases Pillar Two guidance on Safe Harbours and Penalty Relief.”
2. For more information, see our Tax Policy Alert “OECD releases Pillar Two GloBE Rules Administrative Guidance and GloBE Information Return.” 
3. For more information, see OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting Project, Tax Challenges Arising from the Digitalisation of the Economy – GloBE Information Return (Pillar Two).

Contact us

Ken Buttenham

Ken Buttenham

National International Tax Leader, PwC Canada

Tel: +1 416 509 5203

Michael Black

Michael Black

Director, International Tax Services, PwC Canada

Ian Bradley

Ian Bradley

Partner, PwC Law LLP

Kara Ann Selby

Kara Ann Selby

Risk and Regulatory Platform Leader, Partner, International Tax, PwC Canada

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