Pillar Two: The First Reporting Obligations Begin in 2026
Knowing good advice With the publication of the official tax return by the Italian Revenue Agency, the Pillar Two (Global Minimum Tax) regime enters its operational phase in Italy. The rules were introduced through Legislative Decree No. 209/2023, implementing EU Directive 2022/2523. Developed under the OECD/G20 Inclusive Framework, Pillar Two aims to ensure a minimum effective tax rate of 15% for multinational enterprise groups and, in certain circumstances, for large domestic groups. The regime applies to groups with consolidated revenues of at least €750 million in at least two of the four preceding fiscal years. The system is based on calculating the Effective Tax Rate (ETR) in each jurisdiction where the group operates. Where the effective tax rate falls below the 15% minimum threshold, a Top-Up Tax is levied to bridge the gap. In practical terms, the regime is designed to ensure that the profits generated by multinational groups are subject to a minimum level of taxation, regardless of the jurisdiction in which they are earned. The underlying objective is to reduce the tax advantages associated with shifting profits to jurisdictions offering particularly low levels of taxation. The legislation provides for three distinct mechanisms through which the Top-Up Tax may be collected: Qualified Domestic Minimum Top-up Tax (QDMTT), which grants the source jurisdiction the primary right to collect the additional tax; Income Inclusion Rule (IIR), generally applied at the level of the ultimate parent entity; andUndertaxed Profits Rule (UTPR), which operates as a residual mechanism where neither the QDMTT nor the IIR applies. Italy has implemented its own domestic QDMTT, referred to as the National Minimum Tax (Imposta Minima Nazionale). The Pillar Two rules apply to fiscal years beginning on or after 31 December 2023 and therefore, for taxpayers with a calendar-year accounting period, from the 2024 tax year onwards. However, 2026 represents the first real operational milestone, as it marks the beginning of the first filing and reporting obligations required under the new legislation. Affected groups will need to assess whether the rules apply to them and coordinate internally to ensure compliance with the new reporting requirements. To facilitate the initial implementation of the new regime, the legislator has introduced Transitional Safe Harbour provisions applicable to accounting periods beginning on or before 31 December 2026 and ending on or before 30 June 2028. Where specific conditions are met—relating, for example, to the size of the local business, the jurisdiction’s effective tax rate or the existence of sufficient economic substance—the Top-Up Tax may be deemed to be zero, thereby avoiding the need to apply the more complex Pillar Two computational rules. Eligibility for the Transitional Safe Harbour is based primarily on information contained in the group’s Country-by-Country Report (CbCR). This allows businesses to focus their compliance efforts on jurisdictions presenting a genuine low-tax risk while significantly reducing the administrative burden during the first years of implementation. For many multinational groups, assessing whether these simplification measures are available will represent one of the first key steps in their Pillar Two implementation project. Pillar Two introduces a fundamentally different approach from traditional international tax systems. Rather than focusing solely on the tax burden of each individual company, the new rules assess the overall effective tax rate achieved by the group in each jurisdiction. This requires a far more integrated approach to tax and financial reporting, together with continuous monitoring of the group’s international operations. From this perspective, Pillar Two represents a significant change for corporate tax departments, which must now consider not only the effects of domestic tax legislation but also the broader consequences that local tax positions may have across the multinational group. The introduction of the Global Minimum Tax also marks a gradual departure from the traditional model based exclusively on national tax legislation, strengthening the trend towards greater international tax coordination. Tax decisions taken in one jurisdiction may now have direct implications in other countries where the group operates, making globally coordinated tax planning increasingly important. In this context, businesses will need to pay close attention not only to monitoring effective tax rates across jurisdictions but also to the quality, consistency and reliability of the tax and accounting data used for Pillar Two calculations and future reporting obligations. Overall, Pillar Two represents one of the most significant developments in international taxation in recent years.It introduces entirely new obligations for multinational groups, requiring continuous monitoring of effective taxation across jurisdictions, greater coordination at group level and significantly enhanced tax governance.For businesses falling within its scope, the 2025–2026 period will be crucial in determining the correct application of the rules, implementing the necessary internal processes and preparing for the first reporting obligations under the Global Minimum Tax regime. 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