Pillar 2: QDMTT or Safe Harbour Domestic Minimum Top-Up Tax (SHDMTT)?

6 Pages Posted: 29 Nov 2023

See all articles by Joachim Englisch

Joachim Englisch

University of Münster - Faculty of Law

Date Written: October 31, 2023


The GloBE Model Rules have introduced the Qualified Domestic Minimum Top-Up Tax (QDMTT) into the ruleset of the international compromise on an effective minimum tax (“Pillar 2”). Countries need not implement a QDMTT as part of the internationally agreed “common approach” to Pillar 2. However, it is generally assumed that there exist strong incentives for its adoption, once a critical mass of countries will have implemented the GloBE Model Rules. Possible alternative domestic minimum tax designs are hardly discussed, because they are generally assumed to be inferior to a QDMTT.

This short policy paper first summarizes the benefits that the adoption of a QDMTT offers to jurisdictions, as well as associated drawbacks and administrative challenges especially for developing countries. In a second part, it is suggested that a Safe Harbour Domestic Minimum Top-Up Tax (SHDMTT) could be a viable alternative to the QDMTT. Like the latter, it safeguards the primacy of source countries to tax locally generated profits, and it allows jurisdictions to maintain their preferred mix of tax incentives, with only moderately higher losses in international competitiveness for limited catagories of MNEs. However, it is far easier to comply with and administer, and requires no peer review to take immediate effect.

Keywords: Minimum tax; Pillar Two; GloBE; QDMTT; SHDMTT

JEL Classification: K34

Suggested Citation

Englisch, Joachim, Pillar 2: QDMTT or Safe Harbour Domestic Minimum Top-Up Tax (SHDMTT)? (October 31, 2023). Available at SSRN: https://ssrn.com/abstract=4621511 or http://dx.doi.org/10.2139/ssrn.4621511

Joachim Englisch (Contact Author)

University of Münster - Faculty of Law ( email )

Universitaetsstr. 14-16
Muenster, 48149

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