In this blog post, we take a look at the compliance obligations under the global minimum taxation (Pillar 2) and the upcoming changes as a result of the recently adopted DAC9 directive, which represents a significant step towards strengthening tax transparency and simplifying tax compliance. This directive is part of the EU's efforts to combat tax avoidance and promote a fair tax system.
What are the compliance obligations under the global minimum taxation?
Compliance obligations in jurisdictions that have implemented the global minimum tax are not necessarily identical. The OECD mandates only the submission of a GloBE Information Return (GIR), which includes essential information about the MNE group and the necessary details for calculating the top-up tax amount in the respective jurisdictions. However, the OECD allows member states the flexibility to impose additional administrative requirements on MNE groups beyond the mandatory GIR, such as a separate tax filing, provisions on payment obligations and interest on late payments. So far, this has resulted in the emergence of separate tax filing and potential registration obligations (e.g. Pillar 2 registration in Belgium or notification of the so-called group parent entity in Germany).
1. GloBE Information Return (GIR)
The GIR is a standardised template form that provides tax administrations with the information needed to evaluate a Constituent Entity’s (CE) tax liability under GloBE Rules. The GIR aims to provide the core information to jurisdictions implementing the GloBE Rules. Generally, each CE is required to file a GIR with the local tax authorities. However, relief can be granted under two conditions:
- One CE can act as a Designated Filing Entity (DFE) and submit the GIR on behalf of one or more CEs located in the same jurisdiction.
- The obligation to submit a GIR can also be waived, when CEs are located in different jurisdictions. This, however, requires the tax authorities of the respective jurisdictions to have an agreement in place to automatically exchange the GIR. This setup allows for a streamlined process where a single GIR filed by the Ultimate Parent Entity or DFE can be shared with relevant tax administrations across all jurisdictions where the MNE group operates, through international exchange mechanisms.
2. Separate top-up tax return
Although the OECD provides important guidelines, it leaves it to individual member states to determine the specific tax return filing requirements. This means that currently, a tax return must be filed in each jurisdiction in which a multinational group operates, potentially requiring each CE to file separately. In order to streamline tax compliance, member states have taken actions to concentrate tax filing obligations in one designated entity (comparable to the DFE). These country-specific requirements can vary significantly, making it complicated for MNE groups to keep track of and ensure compliance with all local regulations. A more unified approach could not only reduce the administrative burden but also contribute to increasing international tax transparency. However, there is currently no consultation in this regard at the level of the EU.
3. Further requirements (to the extent implemented)
Besides the above-mentioned compliance obligations, member states have further introduced GloBE-specific compliance obligations to the extent they have deemed such measures necessary. In some member states, for example, special registration of CEs subject to the GloBE rules must be carried out, while other member states rely on already existing data.
What is the purpose of DAC9?
DAC 9 updates the existing EU Directive on Administrative Cooperation (DAC) by extending the tax transparency rules. It simplifies reporting for MNE groups by enabling the central submission of the GloBE-Information Return (GIR), i.e. one company submits the return for the entire group instead of separate local submissions by individual CEs. The Directive introduces a standard form for filing the GIR across the EU, in line with the form developed by the G20/OECD's inclusive Base Erosion and Profit Shifting (BEPS) framework.
Please note: The Council’s term “Top-up tax information return“ is not 100% precise and must not be confused with the top-up tax return. The DAC9 directive addresses the GloBE Information Return (GIR).
When must the directive be implemented?
The DAC9 directive will enter into force on the day following its publication in the Official Journal of the European Union. Member states must adopt and publish all necessary laws, regulations and administrative provisions to comply with this directive by December 31, 2025. The deadline for filing the first top-up tax return is June 30, 2026.
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