A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax

The document explains the OECD/G20 Pillar Two GloBE rules, which aim for a 15% global minimum tax on multinational enterprises (MNEs) with revenues over EUR 750 million. It details how top-up taxes are collected via the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR), and how countries can pre-empt these by adopting a Qualified Domestic Minimum Top-Up Tax (QDMT). The guide analyzes the impact of GloBE on various tax incentives, providing a framework for countries to assess their exposure using country-by-country (CBC) reporting. It also addresses legal barriers to tax reform, specifically fiscal stabilization clauses in investment contracts and protections under Bilateral Investment Treaties (BITs), such as the Fair and Equitable Treatment (FET) standard.

• The GloBE regime ensures in-scope multinational groups pay an effective minimum tax rate of 15% in each operating country; if the effective tax rate (ETR) falls below this, other countries may collect a top-up tax.
• The Substance-Based Income Exclusion (SBIE) reduces the amount of income subject to top-up tax based on a company's tangible assets and payroll in the source country, allowing some routine investment returns to remain low-taxed.
• Profit-based incentives, such as income tax holidays and export processing zones, are highly likely to reduce the GloBE ETR and trigger top-up taxes, whereas payroll and property tax incentives generally have no impact.
• Preliminary assessments suggest that most top-up tax revenue under GloBE will be generated in developed economies and low-tax developing economies due to their lower average ETRs and larger stocks of foreign direct investment.
• Fiscal stabilization clauses in domestic laws and investment contracts may limit a government's ability to change tax laws or require compensation, potentially creating legal risks when implementing GloBE-related reforms.
• The Fair and Equitable Treatment (FET) standard in Bilateral Investment Treaties (BITs) represents the most significant legal risk for states reforming tax laws, as it can be used to challenge the withdrawal of stabilized tax incentives.

APA

Christians, A., Lassourd, T., Mataba, K., Ogbebor, E., Readhead, A., Shay, S., & Tinhaga, Z. P. (2023). A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax. International Institute for Sustainable Development. https://www.iisd.org/system/files/2023-06/guide-developing-countries-adapt-global-minimum-tax-final_0.pdf

Chicago

Christians, Allison, Thomas Lassourd, Kudzai Mataba, Eniye Ogbebor, Alexandra Readhead, Stephen Shay, and Zach Pouga Tinhaga. A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax. International Institute for Sustainable Development, 2023. https://www.iisd.org/system/files/2023-06/guide-developing-countries-adapt-global-minimum-tax-final_0.pdf.

Wikipedia

{{cite report |last1=Christians |first1=Allison |last2=Lassourd |first2=Thomas |last3=Mataba |first3=Kudzai |last4=Ogbebor |first4=Eniye |last5=Readhead |first5=Alexandra |last6=Shay |first6=Stephen |last7=Tinhaga |first7=Zach Pouga |title=A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax |publisher=International Institute for Sustainable Development |date=April 2023 |url=https://www.iisd.org/system/files/2023-06/guide-developing-countries-adapt-global-minimum-tax-final_0.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{christians2023guide, author = {Christians, Allison and Lassourd, Thomas and Mataba, Kudzai and Ogbebor, Eniye and Readhead, Alexandra and Shay, Stephen and Tinhaga, Zach Pouga}, title = {{A Guide for Developing Countries on How to Understand and Adapt to the Global Minimum Tax}}, institution = {International Institute for Sustainable Development}, year = {2023}, month = apr, url = {https://www.iisd.org/system/files/2023-06/guide-developing-countries-adapt-global-minimum-tax-final_0.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }