KPMG Meijburg professionals set out 10 top Pillar Two areas to watch in 2025
2025 is set to be a year in which Pillar Two becomes ever more ‘real’. The second ‘wave’ of jurisdictions will put their Pillar Two rules into effect, including several Asia-Pacific jurisdictions. The Undertaxed Profits Rule (UTPR) will come into effect in many jurisdictions. By the end of 2025 (as matters currently stand), MNEs will be facing the lapsing of the UTPR Safe Harbour (from 2026), as well as the looming end of the Transitional CbCR (Country-by-Country Reporting) Safe Harbour (from 2027). The first QDMTT related filings will be due by the end of 2025 (e.g., in Belgium, Vietnam). This is paralleled by the anticipated completion, by the OECD, of much of the administrative apparatus of the Pillar Two rules in 2025, e.g., dispute resolution, etc. An important overlay on this is the possibility of further changes to the overall Pillar Two architecture, as the US develops its position.
With all this ahead, we guide you through the Top 10 Pillar Two areas to watch in 2025...
Top 10 areas to watch for in 2025
1. Pillar Two rollout ‘completion’
By end 2025 the final ‘steady state’ adoption of Pillar Two by countries should be clearer
2. Trade turbulence
The impact of proposed and implemented tariffs in 2025 could readily eclipse concerns over Pillar Two impacts. Interactions between the ‘tariff story’ and Pillar Two should become more apparent in the course of the year
3. Parallel tax system changes
Pillar Two is having a knock-on impact on the shape of Corporate Income Tax (CIT) regimes more generally, with many of these changes taking effect in 2025, and others likely to be announced in the course of the year
4. Tax incentives
2025 could see a raft of jurisdictions, across regions, finalizing new post-Pillar Two incentive regimes
5. Accounting and Pillar Two
As Pillar Two becomes more of an established reality in 2025, increased attention will be given to the effect of different GAAPs and accounting treatments on Pillar Two outcomes. At the same time, financial statements will increasingly reflect the impacts of Pillar Two
6. Transfer pricing and Pillar Two
Key message – In 2025 the complex interactions of transfer pricing with Pillar Two are set to become increasingly evident
7. Pillar Two-driven data transformation projects and safe harbours
In 2025 the finalization of the permanent safe harbours, clarified reporting requirements and other considerations, will play into MNE decisions on whether to invest in comprehensive data transformation projects
8. Anti-abuse rules
2025 may see greater clarity with regard to acceptable tax planning and post-Pillar Two group structure optimization
9. Dispute prevention and resolution
As the potential for differences across jurisdictions in the interpretation and application of the Pillar Two rules become more apparent, there is anticipation that 2025 may see greater clarity in mechanisms to help ensure dispute prevention and resolution
10. Future evolution of Pillar Two
With 2025 facing a period of tumult in the trade and tariffs space, the future shape of Pillar Two might still not be clear by year end. Nonetheless, some hints as to the future evolution of the rules may emerge
