What Is Pillar 2? An Introduction to the Global Minimum Corporate Tax

Why Does It Matter?

If the effective tax rate is below 15%, a top-up tax arises; if it is above, it does not. Getting this calculation wrong means you either pay unnecessary tax or face a penalized reassessment years later.

The Formula

ETR = Adjusted Covered Taxes ÷ Net GloBE Income

The calculation is performed on a jurisdictional basis, not a company basis. The figures for all your group companies in Türkiye are combined into a single Turkish rate. A profitable company and a loss-making company are melted into the same pot.

Step by Step

Step 1 — Determine net GloBE income. The starting point is the accounting profit under the financial statements used for consolidation — not the tax base. This amount is adjusted for items set out in the legislation (such as dividend exemptions, certain non-deductible expenses, and prior-period errors).

Step 2 — Determine covered taxes. Corporate tax and similar taxes are taken into account. Deferred tax effects are also factored in under specific rules. Taxes not levied on income, such as VAT or stamp duty, are excluded from this amount.

Step 3 — Find the rate and the shortfall. Top-up tax rate = 15% − ETR.

Step 4 — Determine the tax base. The shortfall rate is applied not to the entirety of net GloBE income, but to the amount remaining after the substance-based income exclusion is deducted. This exclusion carves out a set percentage of payroll costs and tangible assets in the jurisdiction from the calculation. It exists to protect companies with genuine production and employment; the percentages start higher during the transition period and gradually decline to 5%.

Areas of Legal Interpretation in the Calculation

Not every adjustment made in moving from financial accounting net income or loss to GloBE income is of the same nature. Special rules apply to dividends and equity gains, asymmetric foreign exchange differences, intra-group financing transactions, share-based payments, pension obligations, and prior-period errors. Which item is adjusted matters as much as which entity and jurisdiction the adjustment is allocated to — both affect the outcome.

The deferred tax mechanism is particularly important. To prevent temporary differences from artificially lowering the effective tax rate, the system takes deferred tax expense into account within certain limits; however, where certain deferred tax liabilities fail to reverse within a specified period, prior calculations may need to be revisited. For this reason, a preliminary calculation based solely on the current tax provision may not reflect the true liability. To make the calculation defensible later, the data dictionary, the accounting standard used, the rationale for adjustments, currency translations, and elections made should all be documented in writing.

A Simple Example

The combined figures of your group companies in Türkiye:

In this simplified example, although the statutory rate in Türkiye is 25%, the Pillar 2 effective tax rate falls to 11%, and after the substance-based income exclusion, a top-up tax of TRY 12 million arises. In an actual calculation, the domestic top-up tax, safe harbours, prior-period adjustments, and other special rules may change the outcome.