Bill No. 1129 on the minimum taxation of multinational enterprise groups (GloBE global anti-base erosion rules (Pillar Two) of the OECD/G20 Inclusive Framework on BEPS)

SUMMARY

Bill No. 1129 on the minimum taxation of multinational enterprise groups (2026-09, 14 July 2026), treceived by the Parliament on 28 July 2026, transposes the Global Anti-Base Erosion Rules (Pillar Two) (GloBE rules) of the Inclusive Framework on BEPS (Base Erosion and Profit Shifting) of the OECD (Organisation for Economic Co-operation and Development) and the G20.

The GloBE (Pillar Two) rules aim to ensure that large multinational enterprise groups (MNEs) that meet the annual threshold of at least €750 million in consolidated turnover in at least two of the four tax years preceding the tax year in question, pay an effective minimum tax rate of 15 per cent on the profits they generate in each of the jurisdictions in which they operate.

To this end, a supplementary tax on profits applies in jurisdictions where a group does not meet this minimum rate. It is levied through three mechanisms:

• Income Inclusion Rule (IIR), the main mechanism: the parent company of a multinational enterprise (MNE) group pays a supplementary tax when its subsidiaries in a particular jurisdiction are subject to low taxation. The supplementary tax tops up the tax liability to the 15 per cent threshold.
• Undertaxed Payments Rules (UTPR), a fallback mechanism where the IIR cannot be applied (subsidiary): allocation and collection of the supplementary tax by all jurisdictions that have adopted this rule.
• Qualified Domestic Minimum Top-up Tax (QDMTT): the country in which the profits are situated collects the top-up tax itself, rather than other countries under the IRR or the UTPR.

It is this latter mechanism that Monaco has adopted, whilst reserving the right, if necessary, to introduce the IRR or the UTPR at a later date.

The introduction of a Qualified Domestic Minimum Top-up Tax (QDMTT) aims to:

• guarantee a minimum effective tax rate of 15 per cent on activities carried out in Monaco by entities belonging to MNE groups falling within the scope of Pillar Two, in accordance with the structure and content of the GloBE model rules, as specified in the Commentary and administrative guidance approved by the Inclusive Framework on BEPS;
• safeguard Monaco’s right to tax; otherwise, profits made in Monaco by such entities could give rise to the levying of a supplementary tax by other countries.

The QDMTT scheme, which is distinct from the existing tax on profits (ISB), would apply to financial years commencing after 31 December 2026. The first QDMTT reporting obligations and payments would take effect from 2029.

The detailed rules for implementing the Law will be set out by sovereign order.

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MORE INFORMATION

Monaco and BEPS

The 15 BEPS Actions (2015) aim to ensure that the profits of multinational enterprises (MNEs) are taxed where the economic activities generating those profits are carried out and where value is created:

• Action 1: Tax Challenges Arising from Digitalisation
• Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements
• Action 3: Designing Effective Controlled Foreign Company (CFC) Rules
• Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments
• Action 5: Countering Harmful Tax Practices More Effectively, Considering Transparency and Substance
• Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstance
• Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status
• Action 8-10: Transfer Pricing Actions (Aligning Transfer Pricing Outcomes with Value Creation: Intangibles; Risk and Capital; Other High-Risk Transactions)
• Action 11: Measuring and Monitoring BEPS
• Action 12: Mandatory Disclosure Rules
• Action 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting
• Action 14: Making Dispute Resolution Mechanisms More Effective
• Action 15: Developing a Multilateral Instrument to Modify Bilateral Tax Treaties (MI BEPS)

The Inclusive Framework on BEPS, which brings together more than 145 countries and jurisdictions, including the Principality of Monaco, is the body responsible for managing the implementation of the 15 BEPS Actions developing international tax standards, and ensuring peer review of the implementation of the minimum standards.

The Principality has committed to adopting and implementing the four mandatory Actions (minimum standards) of the BEPS: Actions 5, 6, 13 and 14 .

It is a party to the Multilateral Convention of 7 June 2017 on the implementation of measures relating to tax treaties to prevent base erosion and profit shifting (MI BEPS) as well as to the Multilateral Agreement of 2 November 2017 between competent authorities on the exchange of country-by-country reports. Sovereign Order No. 6.713 of 14 December 2017 governs country-by-country reports relating to multinational enterprise (MNE) groups whose consolidated annual turnover in the previous financial year exceeded €750 million.

The Two-Pillar Solution arising from BEPS Action 1

The work carried out under BEPS Action 1, ‘Addressing the tax challenges posed by the digital economy’, led to the adoption on 8 October 2021 of the Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy (Two-Pillar Solution):

— Pillar One (negotiations ongoing), concerning the reallocation of profits, enables countries where goods or services are consumed (market jurisdictions) to tax a portion of the profits of very large, highly profitable multinational enterprises (with global turnover exceeding €20 billion and a profit margin exceeding 10 per cent), regardless of their physical presence: 25 per cent of residual profits (exceeding the 10 per cent profitability threshold) are reallocated and taxed in market jurisdictions.

— Pillar Two (GloBE model rules, the subject of Bill No. 1129) concerning the global minimum tax on profits: ensures that MNE groups reaching the annual threshold of at least €750 million in consolidated turnover pay at least 15 per cent tax in each country in which they operate. The GloBE rules are based on the following three complementary mechanisms:

• Income Inclusion Rule (IIR), the main mechanism: this requires the ultimate parent company of the group (or an intermediate parent company in certain cases) to pay an additional tax in respect of foreign subsidiaries whose effective tax rate (ETR) (the ratio of the total amount of adjusted taxes to the net profit of all entities of the multinational group located in that country) is less than 15 per cent. The additional tax is calculated on the amount of the subsidiary’s excess profits (after deductions relating to actual economic substance, such as payroll and tangible assets) and serves to top up the tax liability up to the 15 per cent threshold.
• Undertaxed Payments Rules (UTPR), a safeguard mechanism when the IIR cannot be applied (subsidiary rule): this applies when the ultimate parent company is situated in a jurisdiction that has not implemented the IIR. In this case, the supplementary tax is apportioned amongst the jurisdictions that have adopted the UTPR, in proportion to the group’s actual economic substance (number of employees and value of tangible assets) in each jurisdiction. Each jurisdiction in which the group operates levies its share of the supplementary tax by disallowing tax deductions under its corporation tax legislation or by applying an equivalent tax.
• Qualified Domestic Minimum Top-up Tax (QDMTT), the subject of Bill No. 1129: each jurisdiction may introduce a supplementary tax at national level, applied to low-taxed entities situated within its territory, in order to bring their effective tax rate up to 15 per cent and to prevent the corresponding supplementary tax from being levied by other jurisdictions under the PIIR or the UTPR.