Pillar 2 Information Bulettin For Turkish Contituent Entities Of Foregin MNE Groups
The OECD Pillar 2 framework introduces a global minimum effective tax rate of 15% for large multinational enterprise (MNE) groups. Türkiye is among the countries that have adopted this system at an early stage and integrated it comprehensively into its domestic legislation. Accordingly, the rules directly affect Turkish subsidiaries of MNE groups whose consolidated revenue exceeds EUR 750 million in at least two of the last four fiscal years. The Turkish implementation is particularly relevant for groups whose ultimate parent entities will begin applying Pillar 2 rules as of 2025.
Within the scope of the Turkish Pillar 2 Regime, three main mechanisms are applied including the Qualifying Domestic Minimum Top-up Tax (QDMTT) and the Income Inclusion Rule (IIR), both effective as of 1 January 2024, as well as the Undertaxed Profits Rule (UTPR), which will enter into force as of 1 January 2025. Through these mechanisms, any low-taxed income generated in Türkiye may be subject to top-up taxation locally, thereby preserving Türkiye’s primary taxing rights.
1. Pillar 2 Implementation in Türkiye
For the 2024 fiscal year, even if the jurisdiction of the ultimate parent has not yet implemented Pillar 2 rules, in the case that the effective tax rate of Turkish subsidiaries falls below 15%, mentioned entities will be subject to QDMTT and any top-up tax liability will be settled in Türkiye.
From 2025 onwards, even if the parent jurisdiction applies the IIR, Türkiye’s QDMTT will still take precedence. In such cases, the top-up tax will first be paid in Türkiye and subsequently credited at the parent level, thereby avoiding double taxation and ensuring alignment with international coordination principles.
2. Reporting Obligations of Turkish Subsidiaries
Turkish subsidiaries are directly responsible for calculating and settling any top-up tax arising where their jurisdictional effective tax rate falls below the 15% minimum threshold. In addition, they are required to file a Global Minimum Tax Return (Küresel Asgari Tamamlayıcı Vergi Beyannamesi) in Türkiye, which is separate from the annual corporate income tax return and must include the GloBE Information Return (the GIR) notification as an annex.
It is important to note that the obligation to submit a QDMTT return remains in place even if no top-up tax arises for the relevant period. Accordingly, Turkish subsidiaries which are not designated reporting entities for GIR are liable to declare:
- QDMTT Return: 12 months after the end of the calendar year
- Global Minimum Tax Return (Küresel ATV Beyannamesi) with GIR notification in its annex: 15 months after the end of the calendar year (for 2024 financial year, it applies 18 months after the calendar year)
In the case one of the group entities fulfills those obligations, the other group entities in Türkiye will be regarded as compliant with their Pillar 2 liabilities.
3. GloBE Information Return (GIR) Filing Obligations
The GloBE Information Return (GIR) is a standardized report presenting the MNE group’s Pillar 2 calculations and its overall global effective tax position. As a general rule, this report may be filed by a single designated reporting entity on behalf of the entire group, most commonly the ultimate parent entity.
Nevertheless, Turkish subsidiaries are required to notify the Turkish tax authorities of the entity responsible for filing the GIR and the jurisdiction in which it is located. Furthermore, where no designated reporting entity has been appointed or where effective information exchange mechanisms with Türkiye are not in place, Turkish subsidiaries must be prepared to submit the GIR locally. Accordingly, Turkish subsidiaries that are designated reporting entities for GIR are liable to declare:
- QDMTT Return: 12 months after the end of the calendar year
- GloBE Information Return for MNE Group: 15 months after the end of the calendar year (for 2024, it is 18 months)
- Global Minimum Tax Return (Küresel ATV Beyannamesi) with GIR in its annex: 15 months after the end of the calendar year (for 2024, it is 18 months)
4. Other Key Liabilities and Compliance Burdens in Türkiye
Beyond the top-up tax itself, the Turkish subsidiaries in-scope MNEs will face significant operational and compliance challenges in Türkiye:
- Data Collection and Systems: The subsidiaries need to develop robust systems to collect and process the vast amount of data required for GloBE calculations, which goes far beyond standard tax and accounting information.
- Technical Expertise: Calculating GloBE income, covered taxes, and the ETR involves numerous complex adjustments. Companies will need access to specialized knowledge, either in-house or through external advisors like Grant Thornton Türkiye.
- Ongoing Monitoring: The MNE group should continuously track its consolidated revenue to confirm it remains subject to the rules. Any changes in group structure or business operations will also need to be assessed for their Pillar 2 implications.
In summary, by implementing a comprehensive and early Pillar 2 framework, Türkiye has ensured that it will be the primary jurisdiction to collect top-up taxes from the Turkish operations of MNEs. For Turkish subsidiaries, the immediate priorities are to prepare for the calculation and payment of the QDMTT and establishing a continuous process as the due date for QDMTT return and payment is approaching soon.
5. Key Takeaways on Türkiye's Pillar 2 Implementation for Foreign Multinationals
Based on Türkiye's early and comprehensive adoption of the OECD's Pillar Two framework, here are the essential takeaways for foreign multinational enterprises (MNEs) with subsidiaries in Türkiye.
- Primary Taxing Right Belongs to Türkiye: The most critical point is that Türkiye's Qualifying Domestic Minimum Top-up Tax (QDMTT), effective since January 1, 2024, gives it the primary right to tax the local profits of MNE subsidiaries. If a Turkish entity's effective tax rate (ETR) is below 15%, the resulting top-up tax is paid directly to the Turkish tax office, not to the parent company's jurisdiction.
- Parent Company's Rules are Secondary: Even when the MNE's home country implements its own Pillar 2 rules (like the Income Inclusion Rule - IIR) in 2025 or later, it will not override Türkiye's taxing right. The parent's jurisdiction must provide a tax credit for the QDMTT paid in Türkiye. This prevents double taxation but confirms that the actual cash tax liability for profits generated in Türkiye remains within Türkiye.
- Immediate Compliance and a Two-Phase Timeline: Pillar 2 is not a future concern; it is a current liability.
-Fiscal Year 2024: For the 2024 fiscal year, Türkiye had the sole right to apply a top-up tax via its QDMTT, as the parent company's jurisdiction rules were not yet active.
-Fiscal Year 2025 and Onwards: With the addition of Türkiye's Undertaxed Profits Rule (UTPR) from January 1, 2025, the framework is complete, ensuring Türkiye's taxing rights are protected even as global rules become widespread.
- Specific and Mandatory Local Filing Obligations: Global compliance is not enough. MNEs should adhere to specific local requirements:
-QDMTT Filing: Turkish subsidiaries must submit a QDMTT return remains in place even if no top-up tax arises for the relevant period. QDMTT return must be filed within 12 months following the end of the accounting period.
-Global Minimum Tax Return Filing: Turkish subsidiaries are required to file a Global Minimum Tax Return must include the GIR notification as an annex.
-GIR Filing for Designated Entities: In the case that there is no designated reporting entity has been appointed or where effective information exchange mechanisms with Türkiye are not in place, Turkish subsidiaries must be prepared to submit the GIR.
- Internal Readiness is Crucial: MNEs must ensure their Turkish operations are equipped to handle the new compliance burden. This includes developing robust systems for the extensive data collection required for GloBE calculations and securing technical expertise to navigate the complex adjustments needed to determine the jurisdictional effective tax rate.
You can contact us for your questions on our bulletin and Pillar 2 liabilities of Turkish subsidiaries of foreign MNEs.
