Pillar Two in the GCC: What Businesses Need to Know
Pillar Two introduces a global minimum corporate tax framework that affects large multinational groups operating across jurisdictions. Developed under the OECD BEPS initiative, the rules aim to ensure that profits are taxed at a minimum effective rate of 15 percent, regardless of where those profits are reported. For businesses in the GCC, Pillar Two represents a significant shift that goes beyond tax and into systems, reporting, and governance.
Why Pillar Two Matters
The objective of Pillar Two is to reduce base erosion and profit shifting by limiting the benefits of low tax jurisdictions. The rules apply on a jurisdiction by jurisdiction basis, meaning tax outcomes are assessed separately for each country where a group operates. This significantly increases complexity for multinational groups with regional and global footprints.
How the Rules Work
Where a jurisdiction’s effective tax rate falls below 15 percent, a top up tax is applied to bridge the gap. This tax may be collected by the parent entity under the Income Inclusion Rule or, if that does not apply, by other jurisdictions under the Undertaxed Payment Rule.
Many countries, including those in the GCC, are introducing a Qualified Domestic Minimum Top Up Tax. This allows the local jurisdiction to collect the additional tax before another country does, helping protect domestic tax bases.
Who Is in Scope
Pillar Two applies to multinational groups with consolidated global revenue exceeding EUR 750 million. This threshold aligns with Country by Country Reporting requirements. Once in scope, compliance is mandatory, even if the group already pays higher tax in some jurisdictions.
Certain entities such as pension funds, investment funds, and shipping businesses may be excluded, subject to specific conditions.
Pillar Two in the GCC
Several GCC countries have introduced or announced Pillar Two related legislation, with implementation largely effective from 1 January 2025. While not all rule components are active across the region, businesses are already expected to prepare for registration, data collection, and future reporting obligations.
Preparing for Compliance
Pillar Two requires accurate data, coordinated systems, and early planning. Businesses should assess their exposure, review jurisdictional effective tax rates, and ensure finance and tax teams are aligned on upcoming compliance requirements.
MCA Gulf Perspective
MCA Gulf has been closely involved in Pillar Two developments across the GCC, working with multinational groups to interpret evolving guidance and assess practical implications. Our work focuses on translating complex rules into clear, actionable requirements for tax, finance, and governance teams.
We support organizations in evaluating group structures, calculating jurisdictional effective tax rates, and identifying potential top up tax exposure in advance of filing obligations. This enables businesses to address data gaps, align internal systems, and prepare for compliance with confidence and accuracy.
For further technical insight, download MCA Gulf’s detailed guide on Pillar Two implementation in the GCC below.
