The OECD’s BEPS Pillar Two framework is driving a global shift towards a minimum 15% corporate tax rate across countries, aimed at preventing profit shifting and base erosion.
With more than 140 countries agreeing to the framework, businesses operating internationally must prepare for changes.
This blog explores whether India will adopt the 15% global minimum tax, its possible impact on Indian companies, and what CFOs and founders need to know for 2025.
Legal Reference
- OECD/G20 Inclusive Framework on BEPS
- BEPS Pillar One and Pillar Two Final Reports, 2021
- Finance Bill 2025 discussions on international tax alignment
What is BEPS Pillar Two?
BEPS (Base Erosion and Profit Shifting) Pillar Two establishes a Global Anti-Base Erosion (GloBE) Rule:
- Sets a minimum effective tax rate (ETR) of 15% for multinational enterprises (MNEs)
- Applies to MNE groups with global revenue above €750 million (~₹6,500 crore)
- Taxes profits earned in low-tax jurisdictions to a minimum level
If local taxes are below 15%, the home country can impose a top-up tax.
Why is Pillar Two Important?
- Targets profit shifting to low/no-tax jurisdictions
- Protects tax bases of higher-tax countries like India
- Reduces incentives to move intangible income offshore
- Creates a level playing field among multinationals
India’s Current Position
- India supports the OECD BEPS project as a member of the Inclusive Framework
- India has already implemented Equalisation Levy and significant economic presence rules in anticipation of global tax reforms
- No formal legislation on Pillar Two enacted as of April 2025, but
- Finance Ministry indicated in Budget 2025 that India is considering alignment for MNEs meeting GloBE thresholds
Possible Scenarios for India in FY 2025–26
| Scenario | Implication |
|---|---|
| Full Adoption | Indian MNEs crossing €750M revenue must comply with 15% global minimum ETR calculations |
| Partial Adoption | Specific sectors (e.g., SaaS exports) or outbound investments could face targeted top-up taxes |
| Delayed Adoption | India may wait for OECD guidelines finalization and US/EU implementation before full rollout |
Impact on Indian Companies
- Large Indian MNEs: If they operate in low-tax jurisdictions (e.g., UAE, Singapore), they may face top-up taxes
- Indian subsidiaries of foreign MNEs: Could see transfer pricing pressure if headquarters adjust group structures
- Start-ups and SMEs: No immediate impact unless revenue crosses global threshold
Practical Example
Company A (Indian HQ):
- Revenue: ₹10,000 crore globally
- Subsidiaries in Singapore (ETR 5%) and India (ETR 25%)
- Pillar Two implemented
Top-up tax applicable on Singapore profits to bring ETR up to 15%.
Compliance Requirements Expected
- Preparation of GloBE Information Return annually
- Country-by-country calculation of effective tax rates
- Adjustment entries in consolidated accounts for top-up taxes
Planning Tips for Indian MNEs
- Assess current ETRs in all operating countries
- Model Pillar Two impact on group effective tax rate
- Evaluate restructuring needs (e.g., IP migration, holding company changes)
- Monitor local adoption timelines in India and abroad
- Start documentation to prove substance and activities in each jurisdiction
Conclusion
While India has not formally adopted BEPS Pillar Two as of FY 2025–26, large Indian multinationals must prepare for a 15% global minimum tax regime soon.
Early readiness will minimize tax risks, avoid disputes, and ensure smooth compliance once formal adoption happens.
Call to Action and Disclaimer
Need help assessing how BEPS Pillar Two could affect your group’s international tax structure?
Schedule a meeting with our Chartered Accountant, Anshul Goyal, by visiting:
Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. This blog is for general informational purposes and does not replace customized legal advice.
Frequently Asked Questions
1. Does Pillar Two apply to all Indian companies?
No. It applies only to MNE groups with global revenue above €750 million.
2. When will India officially implement Pillar Two?
No official date announced, but alignment likely by 2026–27.
3. How is Effective Tax Rate (ETR) calculated under Pillar Two?
Aggregate tax paid divided by adjusted profits in each jurisdiction.
4. Can Indian start-ups ignore Pillar Two for now?
Yes, unless they grow into large global enterprises.
5. Will Pillar Two replace India’s existing transfer pricing rules?
No. It will coexist with current transfer pricing and international tax regimes.