Pillar Two will have a low impact in NZ - but there's still some boxes to tick

As part of an interconnected international system, we remain exposed to the behaviour of large offshore-based multinationals, some of which could engage in aggressive tax planning across jurisdictions. By allocating profits into jurisdictions like Hong Kong, Ireland, Luxembourg, the Netherlands, Singapore or Switzerland, these multinationals can achieve relatively low effective tax rates in some of the places they operate. The OECD, which is driving change in global corporate taxation, has estimated that profit-shifting could cost governments up to US$240 billion a year. 

There are two pillars to the OECD/G20 inclusive framework on base erosion and profit shifting (BEPS). 

In a nutshell, Pillar One is designed to reform international tax rules addressing challenges arising from the digitalisation of the economy.

Complementing this, Pillar Two - or the global minimum tax framework - has been introduced to ensure large multinationals are subject to a minimum effective tax rate (ETR) of 15% on their profits on a jurisdictional basis, reducing incentives for profit shifting and aggressive tax competition.

Expected tax impacts in New Zealand 

Under Pillar Two rules, if profits are taxed below the threshold, a “top-up” tax is applied to bring the ETR up to 15%. 

This will have the effect of “reducing the incentive for profit shifting and placing a floor under tax competition, bringing an end to the race to the bottom on corporate tax rates,” as the OECD explains.

Here in Aotearoa, plenty of offshore-based multinationals ply their trade, but existing tax settings mean many firms are reporting effective tax rates at or above 15%. 

It’s highly unlikely any of them will be required to make up a shortfall under the GloBE Rules. 

Overall, despite some predictions in the tens of millions in increased tax take, we believe the local tax impact of the GloBE Rules will be approaching zero. But New Zealand likes to be cooperative, so we are following the rules to show we are taking it seriously. 

Parent entities need to register a GloBE account with Inland Revenue

To make sure New Zealand is ticking all the boxes, Inland Revenue (IR) has created a GloBE registration system in myIR. If a Pillar Two multinational entity operates in Aotearoa, it must register for a GloBE account in myIR within six months of the end of the fiscal year that began after 1 January 2025. The deadline is 30 June 2026 for entities with a fiscal year ending 31 December 2025. 

The multinational enterprise will need to register and provide details to IR to then file annual GloBE Information Returns (GIR). The GIR is a standardised report, and it should indicate whether any top-up tax is payable. In the unlikely event the enterprise does need to pay top-up tax, it will need to file a top-up tax return, due 15 months after fiscal year-end, although you get a three-month grace period for the first report. 

The way New Zealand applies GloBE rules means there are potential penalties for failing to register or file your GIR. The maximum penalty is NZD$100,000, so you should ensure appropriate systems and processes are in place to meet these obligations

Do local subsidiaries of large multinationals know about GloBE?

Many large multinationals have a modest footprint in New Zealand and might not even be aware of their requirement to register a GloBE account and associated local compliance requirements due to limited local resources, and potentially no finance team in New Zealand.

For example, a foreign-owned group manufactures solar panels with revenues exceeding more than NZD 2bn, but only employs two B2B salespeople in its New Zealand entity. Or consider another multinational group that produces medical devices achieves NZD$5 billion in revenue on a worldwide basis, but their New Zealand based entity only employs a local technician who advises hospitals on which products to use.

These multinationals are all in scope for Pillar Two and must ensure they complete their respective GloBE registrations here in New Zealand. 

A separate tax agent can be more efficient

A multinational organisation needs to designate a single New Zealand entity to be its GloBE tax agent, and work with that tax agent to set out a lodgement calendar, get the paperwork and reporting in order, and present evidence to IR that demonstrates income and taxation. 

Because a GloBE account is separate to other myIR accounts, organisations can have a separate GloBE tax agent to manage their Pillar Two registration and filing. For the small Kiwi side of a big operation, this can be an advantage. Tax functions can continue to be performed by the inhouse team at the global or regional head office. In parallel, a local tax agent who specialises in GloBE can ensure compliance is achieved by monitoring the myIR GloBE account and being the point of contact for any tax queries.

This is an emerging area of tax law, and these rules are untested. It will be fascinating to see what the global impact of a 15% minimum tax will be on how multinational corporations behave. Will it alter how any corporation behaves here in New Zealand? It’s doubtful. But ensuring compliance helps us support an initiative the OECD forecasts will increase worldwide corporate tax revenues by as much as USD$192 billion per year and make tax more efficient around the globe.  

New Zealand Pillar Two registration and compliance at a glance

Who does it impact?

New Zealand entities that are part of multinational enterprise (MNE) groups, headquartered in either New Zealand or overseas, with global consolidated revenue of at least EUR 750 million (approx. NZD 1.5B) in at least two of the last four fiscal years.

How does it work in New Zealand?

Registration and filing

• A designated NZ entity (or Ultimate Parent for NZ-owned groups) is responsible for registration and submitting the notification on behalf of other NZ constituent entities. 
• If the designated entity changes, the group must de-register the previous entity and then register the new designated entity with Inland Revenue.
• The GloBE account is separate, allowing a tax agent without access to other myIR accounts to manage Pillar Two registration and filing.

The myIR GloBE registration system is expected to be available from mid‑March 2026.

Timeline for December/March balance dates

Penalties of up to NZ$100,000 apply for failing to register or file the GIR on time.