Pillar Two: A catalyst for finance, risk and compliance

Pillar Two isn’t coming. It’s here. And it’s changing the way multinational enterprises (MNEs) think about tax, compliance, and collaboration. According to PwC’s Global Reframing Tax Survey 2025, 91% of large organisations expect to be impacted. Yet only 43% of tax professionals feel ready. Over half are already bringing in external advisors to close the gap.

But this isn’t just about compliance. It’s about transformation. Pillar Two is a moment to reframe how tax, finance, and risk teams work together to deliver value faster, smarter, and more sustainably.

Pillar Two sets a global minimum effective tax rate of 15%. But the real shift? It’s structural. It redefines how organisations must operate, demanding joined up thinking across tax, accounting, finance, risk, and technology.

Tax teams can no longer work in isolation. Accounting teams bring the frameworks that underpin GloBE income calculations. Risk and control teams ensure the integrity of processes and data. Technology teams enable the systems and automation needed to manage complexity at scale. Together, they form the foundation for confident, compliant decision-making.

Protecting value is important but creating it is the real opportunity. When these functions collaborate, they unlock insights, streamline reporting, and build trust with stakeholders. They move faster, with greater clarity and resilience.

Pillar Two calculations start with financial accounting, not tax data. That’s a fundamental shift. For the first time, global tax compliance is anchored in the numbers reported in consolidated and statutory financial statements. This means finance leaders must be at the table from day one.

The OECD’s decision to base Pillar Two on established accounting standards like IFRS and US GAAP is deliberate. It’s about creating a consistent, efficient, and trusted foundation for global tax reform. But it also introduces new complexity. MNEs must reconcile parent-level and local GAAP differences, allocate topside entries, and reverse intercompany eliminations—all while ensuring jurisdictional accuracy.

This is where accounting becomes strategic. It’s no longer just about closing the books. It’s about enabling agility across borders, supporting real-time decision-making, and ensuring the integrity of data that underpins global compliance. Finance teams are now central to how organisations navigate risk, unlock value, and build trust in a rapidly evolving tax landscape.

1. Defining the Pillar Two group

Getting the scope right is foundational, and it’s more complex than it looks. Pillar Two relies on accounting consolidation rules to determine which entities are included in the Pillar Two group. That means joint ventures, associates, and investment entities that may not be consolidated for legal, or tax purposes could still fall within scope.

This shift requires a detailed understanding of your group’s financial reporting structure and how it maps to Pillar Two definitions. It also demands close coordination between tax, accounting, and legal teams to ensure that the right entities are captured, and that none are missed. Missteps here can cascade into downstream errors in GloBE income, effective tax rate (ETR) calculations, and compliance filings.

In short: defining the Pillar Two group isn’t just a technical exercise. It’s a strategic one. And it sets the tone for everything that follows.

2. Calculating GloBE income

GloBE income is the beating heart of Pillar Two. But calculating it is anything but straightforward. It requires a forensic look at how accounting entries are recorded, how they are interpreted across jurisdictions and how Pillar Two rules have been adopted in different territories.

Topside entries recorded only at the consolidated level may need to be allocated to individual entities. Intercompany eliminations must be reversed. Purchase price accounting adjustments, like amortisation and depreciation, need to be recalculated. And elective adjustments, such as those for stock-based compensation, must be tracked and justified.

Add to that the need to reconcile parent GAAP with local GAAP, and the challenge becomes clear. This goes beyond number-crunching. It’s about designing a data model that’s resilient, transparent, and built for confident decision-making.

And because Pillar Two relies on standalone entity data aggregated at the jurisdictional level, tax and accounting teams must align early and stay aligned. This is where collaboration becomes a competitive advantage. When teams work together from the outset, they reduce risk, increase accuracy, and build the foundation for confident compliance.

Start early: Aligning for success

While transitional safe harbours may offer temporary relief, many MNEs may not qualify in practice. Early action remains essential to avoid compliance gaps and missed opportunities. The window to prepare is narrow and closing fast. Use this time to align stakeholders, assess systems, and clarify accounting positions and tax elections. Early engagement isn’t just a best practice, it’s a strategic advantage.

Pillar Two introduces new data, new processes, new calculation rules and new expectations. Acting early avoids the pitfalls of rushed decisions, scattered data, and missed opportunities when compliance becomes mandatory. Instead, use this lead time to build a reporting structure that’s not just compliant—but resilient. One that can flex with evolving rules, support audit readiness, and scale across jurisdictions.

Start now. Align early. Lead with confidence.

Pillar Two introduces new risks from data quality, calculation integrity, and process reliability. These aren’t theoretical. They’re operational. And they require a proactive response.

Risk and control teams must be embedded early to design safeguards that detect and mitigate issues before they escalate. This includes controls around data sourcing, transformation, and reporting, especially as organisations navigate multiple systems and jurisdictions. Given the complexity of Pillar Two calculations, spanning hundreds of data points across entities and jurisdictions with complex Pillar Two local tax rules and diverse compliance reporting obligations, using a dedicated calculation engine (like PwC Pillar Two Engine) is critical to ensure accuracy, auditability, and speed.

This isn’t just about avoiding penalties. It’s about enabling faster, smarter decisions. According to PwC’s Global Compliance Survey, only 7% of companies consider themselves compliance leaders. Yet 71% are planning digital transformation initiatives that depend on strong compliance foundations. Pillar Two is a proving ground for whether your risk and control environment is ready for what’s next.

Why Pillar Two is so data complex

Pillar Two is not just a new tax rule, it’s a new operating reality. MNEs may have to manage up to 330 new data points per entity, many of which have never been sourced before. These data points are scattered across ERP, tax, HR, and finance systems, and often owned by different teams. That makes coordination and governance critical.

The January 2025 Administrative Guidance adds another layer of complexity. It requires MNEs to complete the GloBE Information Return (GIR) based on OECD rules, not local legislation. This means dual compliance strategies are now the norm: one for global reporting, another for local filings. It’s a heavy lift—and one that demands precision, transparency, and agility.

Technology is no longer optional. It’s essential. PwC’s Pillar Two Engine is designed to manage this complexity, from calculating top-up taxes to generating XML schema and reconciling GloBE and local rules. Combined with proprietary and alliance-based data tools, it enables organisations to automate, scale, and adapt with confidence. This isn’t just about compliance, it’s about unlocking strategic value through connected data and intelligent automation.

But technology alone isn’t enough. MNEs must also assess whether their current operating model, insourced, outsourced, or co-sourced, is fit for purpose. Pillar Two is a litmus test for whether your systems, processes, and people are ready for a new era of tax governance. The organisations that succeed will be those that treat Pillar Two not as a one-off project, but as a catalyst for long-term transformation.

The global tax landscape has shifted again. Following a recent agreement by the G7 in June, the OECD will prepare a framework which would exempt US-headquartered multinationals from the cross-border tax collection mechanisms: the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).

This is more than a policy update. If the 147 Member of the Inclusive Framework can reach agreement, it will reflect a strategic alignment between the US tax system (including GILTI, BEAT, and the corporate alternative minimum tax) and the OECD’s global minimum tax regime. It is expected that an agreement would also need to account for greater simplification via safe harbours and to reconsider the treatment of non-refundable tax credits. It is unclear yet whether changes to the model rules will lead to an amended EU Global minimum tax directive.

For US headquartered groups, this could mean no IIR or UTPR exposure (assuming national laws adopt the proposal), although the US groups will still face Qualified Domestic Minimum Top-up Taxes (QDMTTs) in jurisdictions like the UK and EU Member States. Non-US multinationals remain fully subject to Pillar Two, potentially facing a competitive imbalance. It’s not yet clear whether US subsidiaries of non-US groups will benefit from the exemption.

At this point, the announcement is a political commitment of seven countries, which will take time to formally agree and legislate. Until local laws change, existing rules still apply for provisioning, disclosures and tax compliance.

This development reinforces a core Pillar Two theme: agility. As the rules evolve, so must the systems, governance, and cross-functional collaboration that underpin confident compliance.

When tax, finance, and risk teams work together, they don’t just meet the standard, they raise it. They unlock value through better data, stronger governance, and sharper insights. They build trust with regulators, with stakeholders, and with the market.

Pillar Two is more than a regulatory requirement, it’s a catalyst for operational resilience and strategic alignment. By embedding collaboration, data integrity, and agile governance into their response, organisations can turn complexity into capability.

To explore further:

• Learn more about PwC’s Pillar Two Engine and how it supports compliance at scale.
• Read our latest PwC Global Reframing Tax Survey and PwC Global Compliance Survey for executive perspectives on Pillar Two and regulatory transformation.