OECD Pillar Two.
15% global minimum.

How the Pillar Two calculation works

Pillar Two calculates the ETR (Effective Tax Rate) per jurisdiction — not per entity. It sums all covered taxes (IRPJ, CSLL, similar taxes abroad) and divides by the adjusted GloBE income of each jurisdiction. If the ETR falls below 15%, there is a top-up tax to reach 15%.

Top-up tax collection hierarchy

1. QDMTT (Qualified Domestic Minimum Top-up Tax) — first, the low-tax jurisdiction itself has priority to charge locally. Brazil established a QDMTT through Law 15.079/2024.
2. IIR (Income Inclusion Rule) — if there is no QDMTT, the jurisdiction of the Ultimate Parent Entity (UPE) charges the top-up.
3. UTPR (Undertaxed Payments Rule) — a last resort; other group jurisdictions charge proportionally.

Practical example

A Brazilian multinational has a subsidiary in Portugal. Portugal earned EUR 100M in GloBE income with an ETR of 12% (only EUR 12M of covered taxes). Pillar Two requires 15% — a 3% shortfall, or EUR 3M. As both Brazil and Portugal have a QDMTT, the country of “operation” charges first. Without a QDMTT in Portugal, Brazil (the parent’s home) charges via the IIR.

The Brazilian QDMTT

Brazil established its own QDMTT through Law 15.079/2024. It means Brazilian companies with an ETR < 15% pay here the top-up that would otherwise go to the foreign parent. The revenue stays in Brazil — but the company does not recover the benefit of the incentive; it merely redirects the tax from the parent to the QDMTT.

Why Brazil created a QDMTT

Without a QDMTT, every top-up of a Brazilian subsidiary of a multinational would be paid abroad (at the parent). Brazil would lose revenue. The QDMTT preserves local revenue. But it is important to understand: from the company’s standpoint, the tax is the same — only the collecting jurisdiction has changed.

Worked example

• BR subsidiary of an MNE group > EUR 750M with a SUDENE benefit
• GloBE income: BRL 100M
• Nominal IRPJ + CSLL: 34% = BRL 34M
• SUDENE 75% reduction on IRPJ: saving of BRL 18.75M
• Effective ETR: ~16% (below 15% in some cases)
• Top-up to 15%: depends on the calculation
• Pre-Law 15.079: top-up would go to the parent (abroad)
• Post-Law 15.079: top-up stays in Brazil via the QDMTT

Impact on Brazilian tax incentives

The Brazilian tax incentives that historically reduced the local tax burden — SUDENE in the Northeast, SUDAM in the North, the Manaus Free Trade Zone, presumed state ICMS credits validated by Complementary Law 160/2017 — all go through the Pillar Two screen.

SUDENE/SUDAM scenario

A 75% IRPJ reduction (during the benefit period) leads to an ETR of approximately 8-12%. Under Pillar Two, there is a top-up to 15% — the net saving of the incentive falls from ~25 percentage points to close to zero (only the saving of CSLL and non-incident covered taxes).

Manaus Free Trade Zone scenario

Combined federal and state benefits may lead to an ETR of 5-10%. A substantial Pillar Two top-up. The historical appeal of the Manaus FTZ for multinationals > EUR 750M weakens. But for companies below the threshold (EUR 750M), the incentives remain fully in place.

Presumed ICMS credit scenario

States grant presumed ICMS credits (validated by CL 160/2017) for specific industries. STJ Theme 1.182, on re-trial, debates whether these credits are or are not part of the IRPJ/CSLL base. Under Pillar Two, the discussion gains a new dimension: even if decided in the taxpayer’s favor, the saving may become a top-up.

Pillar Two compliance obligations

Pillar Two compliance involves specific documentation and filing obligations:

GIR (GloBE Information Return)

A standardized OECD return, filed annually, reporting ETR calculations per jurisdiction, GloBE adjustments and top-up tax due. In Brazil, integrated into the ECF (Tax Accounting Bookkeeping) with a specific layout.

Country-by-Country Report (CbCR)

A per-jurisdiction report of revenue, profit, taxes paid, employees and tangible assets. Already mandatory since 2018 under BEPS Action 13, it gains additional relevance as an input to Pillar Two.

Master File and Local File

Transfer Pricing documentation (Law 14.596/2023) interacts with Pillar Two — the allocation of profits between jurisdictions affects the ETR calculation.

Filing timeline

• 2026: First year under Pillar Two — ETR calculated and top-up provisioned
• 2027: Filing of the GIR for 2026 (July 2027 with the ECF)
• 2027 onward: Continuous collection of top-up via the QDMTT (monthly/annual per regulation)

Recommended strategy for 2026

Brazilian multinationals (and BR subsidiaries of groups > EUR 750M) must structure their readiness during 2026. Recommended roadmap:

1. Consolidated ETR modeling by jurisdiction — current and projected baseline under Pillar Two, identifying top-up exposure
2. Analysis of Brazilian incentives under the new lens — which still make sense, which lost net attractiveness
3. Functional reorganization if needed — real substance in the jurisdictions, aligned economic allocation
4. Transfer Pricing review — method and margins consistent with Pillar Two
5. Documentation readiness — GIR + CbCR + Master File + Local File coordinated
6. Accounting provision of top-up tax — impact on reported net income as early as 2026

For the complete International pillar, see International Tax Planning.