The Organisation for Economic Co-operation and Development’s (OECD’s) Pillar Two framework introduces a global minimum tax and jurisdictional-level financial reporting to combat the issue of countries losing revenue due to multinational enterprises shifting profits to low- or no-tax jurisdictions.

While this effort targets the world’s largest corporations, its ripple effects are influencing companies of all sizes—particularly those with international operations, complex ownership structures, or growing compliance burdens.

For mid-market companies, this means that expectations around tax transparency, data traceability, and jurisdictional-level reporting are becoming the norm. It’s important to understand the evolving environment and take proactive steps toward readiness, even if your company isn’t currently in scope.

What Is Pillar Two?

The Pillar Two framework requires companies to calculate and pay an effective tax rate of 15% in each jurisdiction where they operate. Agreed to by more than 140 jurisdictions, Pillar Two applies to multinational enterprise groups with consolidated revenue of 750 EUR million (approximately 800 million USD) or more in at least two of the four prior years.

Key elements include:

• Entity-by-entity reporting of income and tax
• Inclusion of deferred tax assets and liabilities
• Global anti-base erosion (GloBE) return filing
• Safe harbors available through 2026 based on existing Country-by-Country Reporting (CbCR) data

The first returns for calendar-year companies are due in 2025, covering the 2024 financial year. 

What Will It Mean for Your Organization?

Even if your organization is not currently in scope, Pillar Two highlights operational challenges that many mid-market companies already face, including:

• Jurisdiction-level expense attribution
• Accurate and timely deferred tax reporting
• Coordination across tax, accounting, HR, and stock administration
• Reconciliation of complex data sets from disparate systems

Companies growing internationally or undergoing internal restructuring are especially likely to encounter pressure to improve data readiness and transparency.

Technology and Data Management Considerations

To prepare for increased reporting demands, your company should evaluate:

• Integration across equity plan systems, HRIS, ERP, and tax tools
• Standardized assumptions: vesting, mobility, forfeiture, tax treatment
• Real-time reporting capabilities and audit traceability
• Clear ownership of each stage of the reporting life cycle

Automation of key calculations—such as deferred tax assets for stock-based compensation—can reduce risk and accelerate close timelines.

Broader Use Case: Transfer Pricing and Beyond

The visibility and coordination required for Pillar Two also support broader reporting needs:

• Transfer pricing documentation and cost allocations
• Global equity compensation reporting under ASC 718/IFRS 2
• Tax provisioning and forecast accuracy
• Local statutory reporting in foreign jurisdictions

Beyond Case Study: Lessons from Medtronic

The long-running Medtronic Inc. v. Commissioner case illustrates the complexity of intercompany transactions and the stakes of getting transfer pricing wrong. The dispute centers on the pricing of licenses between Medtronic, a U.S. parent, and its Puerto Rico subsidiary. The IRS argued that royalty payments were too low, leading to underreported U.S. income. Over years of litigation, disagreements over the “best method” to determine arm’s-length pricing—whether the comparable uncontrolled transaction (CUT) method or the comparable profits method—have shown how subjective data interpretation can lead to costly, drawn-out disputes.

For mid-market companies, the lesson is clear: even without Pillar Two exposure, multinational operations must ensure that data for intercompany pricing, equity compensation, and tax reporting is accurate, well-documented, and defensible. Poor data can lead to disputes with tax authorities, reputational damage, and resource-draining audits.

Key Questions to Ask Internally

Preparing for jurisdictional-level reporting requires an understanding of internal processes and behaviors that may accelerate or slow down this effort. As you undertake this, ask, “are we…”

• Attributing expenses at the entity level?
• Tracking relevant expenses, such as stock-based compensation, across borders?
• Confident in our deferred tax asset reporting?
• Using consistent assumptions across departments?
• Relying on automation or manual Excel workbooks?

Next Steps

To future-proof your reporting and compliance capabilities:

• Assess your current state and learn where your data blind spots are.
• Engage stakeholders across tax, HR, and accounting.
• Identify quick wins: assumption alignment, reconciliation templates.
• Explore scalable technology solutions for automation and reporting.

We’re Here to Help

For more information on how Pillar Two may affect your business, contact your firm professional.

Additional Resources

• Technology Consulting Practice
• Business Intelligence Services