With the first wave of Pillar 2 rules now live, the real test for multinationals has just begun. We break down the immediate impacts, business responses, and the complexities looming in 2026.
The time of Pillar 2 is no longer a future concept; it is the present reality. For multinational enterprises (MNEs) with revenues over €750 million, 2024 marked the dawn of the Global Anti-Base Erosion (GloBE) rules. However, the rollout across Europe has been anything but uniform. As of late 2025, the landscape is a complex patchwork of varying timelines and approaches.
The United Kingdom was an early adopter, implementing its Multinational Top-up Tax (an Income Inclusion Rule, or IIR) and a qualified Domestic Top-up Tax (QDMTT) for accounting periods starting on or after 31st December 2023. The next critical phase, the Undertaxed Profits Rule (UTPR), is set to apply from accounting periods beginning on or after 31st December 2024, adding another layer of complexity for UK-based groups. According to the UK government, legislation is continuously being amended to align with evolving OECD guidance.
Across the Channel, the European Union presents a fragmented picture. Whilst the EU Pillar Two Directive mandated implementation, member states have exercised their options differently. A Tax Foundation analysis from late 2024 shows that whilst 18 of the 27 member states implemented the IIR and QDMTT for 2024, a significant minority did not. Countries like Estonia, Latvia, Lithuania, and Malta opted for a six-year deferral. Others, such as Poland, delayed full implementation until 2025, whilst Spain enacted its law late in 2024 with retroactive effect. This divergence requires MNEs to maintain a jurisdiction-by-jurisdiction compliance tracker, as a one-size-fits-all approach is now dangerously obsolete.
The initial impact of Pillar 2 is being felt not primarily through higher tax bills, but through the immense operational strain of compliance. A recent BDO survey found that 87% of tax leaders view Pillar 2 as a significant challenge for their business. This challenge manifests in three key areas.
The Data Deluge
The GloBE rules require an unprecedented volume of data (over 200 data points per entity in some cases) that often resides in disparate ERP systems, HR databases, and local accounting ledgers. Tax and finance teams are grappling with the monumental task of collecting, validating, and standardising this information. The process has exposed weaknesses in existing data governance, forcing companies to invest in centralised data warehouses and establish new cross-functional workflows to ensure a single source of truth.
The Compliance Burden
The complexity of the GloBE calculations, with their intricate adjustments, elections, and jurisdictional blending, has rendered manual processes and traditional spreadsheet models wholly inadequate. The cost of compliance is escalating as businesses are forced to invest in specialised systems, engage external advisors, and develop their teams' capabilities. As Adam Eagers, Group Tax Director at AS Watson Europe (the world's largest international health and beauty retailer), observed in recent industry discussions: "You can't just take the existing tax team and say 'just work twice as hard' and hope it's going to be alright." The focus has shifted from merely paying the tax to being able to accurately calculate and report it in a defensible manner.
Financial Reporting and Disclosure
Beyond the tax return, Pillar 2 has immediate consequences for financial statements. The International Accounting Standards Board (IASB) has introduced specific disclosure requirements and, crucially, prohibited companies from recognising deferred tax assets and liabilities arising from Pillar 2. This requires careful communication with auditors and investors to manage expectations regarding effective tax rates (ETRs) and future tax liabilities.
Faced with these challenges, proactive CFOs and Tax Directors are moving beyond mere compliance and treating Pillar 2 as a catalyst for strategic transformation. The response from leading firms offers a blueprint for navigating this new environment.
Prioritising Technology and Human Capability
Recognising the futility of manual approaches, forward-thinking organisations are making strategic technology investments whilst building human expertise. The same BDO survey revealed that 42% of the most strategic tax leaders are prioritising systematic approaches to Pillar 2 reporting. This is not just about efficiency; it's about accuracy, control, and enabling talented professionals to focus on analysis and strategic decision-making rather than data processing.
Restructuring Teams and Developing Capability
Pillar 2 is breaking down traditional silos between tax, finance, IT, and legal. Leading companies are creating dedicated, cross-functional teams to manage the end-to-end process. There is also a heavy emphasis on capability development, with over half of tax departments increasing their training budgets. However, this internal focus only solves part of the problem. The demand for professionals who possess the rare blend of tax-technical acumen, data analytics skills, and transformation leadership required for Pillar 2 has skyrocketed.
As Eagers emphasised in recent industry roundtables: "Some of the skills you'll need, you've probably never had in your tax team before," underlining how the role of tax professionals is expanding to meet the technological and strategic needs of modern businesses. The challenge extends beyond technical knowledge to encompass governance, strategic thinking, and cross-functional collaboration.
Talent with this niche expertise is in high demand and critically short supply. This is where specialist recruitment partners play a crucial role. By leveraging deep networks within the international tax and tax technology communities, they connect organisations with the leaders who can drive these complex compliance and transformation programmes. Whether sourcing an interim Pillar 2 project manager for a system implementation or finding a permanent Head of Tax Reporting with GloBE experience, a specialised approach to talent acquisition is becoming essential for navigating this new landscape successfully.
Proactive Scenario Modelling
The most sophisticated MNEs are not waiting to see what their Pillar 2 liability will be. They are actively modelling the impact of the rules (particularly the impending UTPR) on their global ETR, cash flow, and even M&A decisions. This allows them to assess the value of tax incentives, evaluate their corporate structure, and make informed strategic decisions in a post-Pillar 2 world.
Whilst 2024 and 2025 have been about implementation and data gathering, the coming years promise even greater complexity. Tax leaders must prepare for several developing challenges.
The UTPR "Crunch Point"
As described by analysts at A&O Shearman, the activation of the UTPR in 2025 represents a "big crunch point." Unlike the IIR, which is a top-down rule applied at the parent level, the UTPR is a bottom-up rule that can be applied by any jurisdiction where a group operates. This exponentially increases complexity, requiring MNEs to understand the specific UTPR implementation (e.g., denial of deduction vs. supplementary tax) in every single country of operation to avoid double taxation and ensure compliance.
A Shifting Regulatory Landscape
The Pillar 2 rulebook is not set in stone. The OECD continues to release administrative guidance to clarify and amend the rules, which in turn requires countries to update their domestic laws. This creates a moving target for compliance. Furthermore, geopolitical factors, such as potential pressure from a new US administration to alter the rules or the UN's development of a competing tax framework, add layers of long-term uncertainty that could disrupt the current global consensus.
The First True Test: 2026 Reporting Deadlines
The ultimate deadline is fast approaching. For the 2024 fiscal year, the first GloBE Information Returns (GIRs) will be due in many jurisdictions by mid-2026. This will be the first time companies must submit a complete, standardised report detailing their Pillar 2 calculations globally. This deadline will be the true test of the systems, processes, and data strategies that companies have spent the last two years building.
Pillar 2 has fundamentally and permanently altered the international tax landscape. It has evolved from a theoretical compliance exercise into a core strategic issue for the C-suite. The initial phase has been a strenuous test of data and systems, but the challenges ahead (particularly the UTPR and the first global reporting cycle in 2026) will be even more demanding.
Success will not be defined by simply paying the right amount of top-up tax. It will be defined by the ability to navigate the complexity with agility, leverage technology for a competitive advantage, and integrate tax strategy seamlessly into broader business decisions. For CFOs and Tax Directors, the message is clear: the time for reactive compliance is over. The era of strategic, data-driven tax management is here.
About the Author
Bethany Kopiski is a Senior Tax Recruiter at The Consultancy Group, specialising in recruiting tax professionals at all levels across Commerce & Industry throughout the UK & Ireland, Europe, and USA. Her expertise spans from newly qualified tax professionals to Finance Directors, CFOs, and Heads of Tax. Bethany has a real passion for making a difference in people's careers and helping clients find the right tax professional for their needs, whether interim or permanent.
