Pillar Two aims to ensure that Multinational Enterprises (MNE) groups meeting the EUR 750,000,000 consolidated revenue threshold are subject to a minimum corporate taxation of 15%.

On 15 December 2022 (Directive - 2022/2523 - EN - EUR-Lex (europa.eu)), the EU Member States formally approved the EU Directive setting out a harmonized implementation of the Pillar Two model rules in the EU. The Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR) and the Qualified Domestic Top-up Tax (QDMTT) seek to enforce a minimum effective tax rate (ETR) of 15% on a jurisdictional basis. The IIR, UTPR and QDMTT are referred to as the GloBE Rules.

A sequence of seven steps must be followed to determine whether an entity is in-scope of Pillar Two (and benefits, as the case maybe, from a safe harbour), and whether a Top-up Tax is to be assessed to reach the minimum ETR of 15%. These seven steps are summarised below with an emphasis put on items relevant for the real estate sector. We also highlight some attention points in real estate transactions. Note that further guidance from the OECD specific for the real estate sector is still expected.

In terms of entry-into-force and compliance, the IIR and QDMTT rules entered into force on 31 December 2023 (at the earliest) in different jurisdictions both within and outside the EU, and the 2024 GloBE Information Return will have to be submitted by 30 June 2026.