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OECD Pillar Two: Canadian implications of the global minimum tax

Updated: March 19, 2026

At a glance

  • Canada enacts OECD Pillar Two under the Global Minimum Tax Act
  • New global minimum tax compliance framework for large MNEs
  • 2026 marks the first Canadian filing deadline
  • Learn which entities are in scope, filing requirements, deadlines, and penalties for non-compliance
  • Early preparation is critical to managing compliance risk

The introduction of the Organisation for Economic Co-operation and Development’s (OECD) Pillar Two Global Minimum Tax (GMT) marks one of the most significant transformations in international taxation in decades. With Canada’s Global Minimum Tax Act (GMTA) now fully enacted, and the first filings for Dec. 31, 2024 fiscal year-ends due by June 30, 2026, large multinational enterprise (MNE) groups—both Canadian-headquartered and inbound—are entering a new compliance landscape that is highly data-intensive, complex, and time-sensitive. This is particularly the case for industries with decentralized operating models, significant cross border flows, or heavy reliance on incentives and preferential tax regimes. 

This article provides an overview of Pillar Two as it applies in Canada, including scoping, compliance requirements, filing deadlines, and key considerations for compliance with this new law.

What is Pillar Two?

As explained in our article, Landmark announcement by the OECD on global minimum tax rate, Pillar Two is part of the OECD’s two-pillar solution to ensure that MNEs pay their fair share of tax wherever they operate. The two-pillar solution was in response to international concern that the framework for international taxation needed to be updated to address the tax challenges arising from the digitalization of the global economy.

Through the OECD/G20 Inclusive Framework, more than 140 countries agreed to implement a 15% global minimum tax rate for large MNE groups. This is a coordinated regime to ensure large international groups pay a baseline level of tax in each jurisdiction. 

Canada enacted Pillar Two measures domestically through the GMTA, which operates outside of the Income Tax Act.

Who is in scope?

An MNE group must apply Pillar Two if it meets both of the following conditions:

It is a multinational enterprise group

An MNE includes entities (referred to as constituent entities) that are consolidated at the Ultimate Parent Entity (UPE) level. A group is determined based on financial accounting consolidation, not merely legal ownership. Constituent entities, besides the UPE, include:

  • Consolidated subsidiaries
  • Permanent establishments in different jurisdictions
  • Partnerships, trusts, hybrids, and other flow through arrangements (special rules apply)
  • Certain equity accounted entities

It meets the revenue threshold

The MNE group is in scope if it:

  • Has more than €750 million in consolidated revenue for a particular fiscal year that is 365 days long; and
  • Meets this threshold in at least two of the four preceding fiscal years (i.e., for a Dec. 31, 2024 year-end, the look-back years are 2023, 2022, 2021, and 2020).

Notably:

  • Falling below the revenue threshold in the current year does not remove a group from scope.
  • Mergers and acquisition or divestitures may change the threshold tests.
  • Deemed consolidation rules can bring private groups into scope even without published consolidated financial statements.
  • The revenue test is measured in euros. Therefore, Canadian entities that measure revenue in currency other than euros, must convert to determine the consolidated revenue in local currency. For illustration, €750 million converts to $1.18 billion CAD using the Bank of Canada average conversion rate for calendar 2025.

How the 15% minimum tax is calculated

The calculation of applicable GMT relies on financial accounting income and tax expense, not statutory tax rates. The effective tax rate (ETR) must be calculated on a jurisdiction-by-jurisdiction basis. Determining a jurisdiction’s ETR involves starting with book income and qualifying taxes and making over 50 adjustments from book income to calculate a jurisdiction’s minimum top-up tax. This is a complex and data-intensive process, making early data readiness essential.

Transitional country-by-country reporting safe harbour  

From 2024 to2026 (with a proposed extension to 2027), groups may qualify for the temporary transitional country-by country reporting (CbCR) safe harbour.  A jurisdiction qualifies if it meets at least one of the following tests:

  1. De minimis test
  2. Simplified effective tax rate test
  3. Routine profits test

A qualifying jurisdiction is deemed to have nil top-up tax for the year. This relief is significant but requires high-quality and consistent data from CbCR and qualified financial statements.

Filing requirements and due dates

Qualifying MNE groups can appoint one constituent entity to register for a CRA account for GMT purposes, which the CRA designates as a “PT program account”. This will allow that entity to file a particular return (GIR) or notification (GIR notification) on behalf of all other constituent entities that have a filing requirement for that return or notification.

However, each constituent entity that has a GMT liability must separately register for a PT program account.

Under the GMTA, in-scope Canadian constituent entities must file the following:

GloBE Information Return (GIR)

  • Filed by the UPE in its jurisdiction of residence.
  • Filed by a designated Canadian constituent entity where the UPE is resident in a jurisdiction that has not implemented Pillar Two (e.g., the U.S.), and no qualifying GIR is filed in a jurisdiction with exchange to Canada.
  • Can rely on a foreign group filing, in which case a GIR notification is required to be filed with the CRA.

Global Minimum Tax Return (GMTR)

  • Submitted where Canada has a top-up tax liability under the GMTA. Each person who has tax liability under the GMTA or the appointed Canadian filing entity must file a Global Minimum Tax Return with the CRA.

Filing deadlines

  • 15 months after the last day of the UPE’s fiscal year
  • Extended to 18 months for the first year in scope

This means that for qualifying MNE groups who are in scope in their Dec. 31, 2024, year end, the first filings are due June 30, 2026.

Penalties

Non-compliance penalties are substantial and are designed to encourage compliance:

  • GIR non-filing or GIR notification non-filing: $25,000 per month (or part month) the return is late, up to a maximum of $1 million. Transitional relief applies for fiscal years that begin before Jan. 1, 2027 and end before July 1, 2028, where the government determines that the entity took reasonable measures to comply.
  • Failure to provide information: $2,500 per item
  • False statements: 25% of misstatement (min. $5,000)

In addition, criminal penalties are possible for serious offences.

Preparing your organization for global minimum tax

Compliance with the GMTA requires preparation. Assess your exposure before complexity becomes risk. Organizations should consider:

  • Evaluating whether an in-scope MNE group entity exists
  • Detailed information and data gathering 
  • Coordination within the MNE group entities. Canadian entities will need to align with UPE teams, advisors, and global processes in their approach to determining compliance and minimum tax liabilities 
  • Determine whether a safe harbour can be used for the first filing year
  • Evaluating the impact of global minimum tax on financial reporting by the UPE
Certain industries may experience greater complexity due to their operating models, such as groups with fragmented legal entity structures, multiple ERP systems, or significant differences between financial accounting and tax outcomes.

How BDO can help

BDO’s Tax practice offers targeted Pillar Two support across Canadian inbound, outbound, and audit needs, including:

Inbound Canadian entities

  • CRA’s Pillar Two registration and program account setup
  • GIR notifications and coordination with the UPE
  • Transitional safe harbour evaluation
  • Qualified Domestic Minimum Top-up Tax risk assessment and related filings

Outbound Canadian MNEs

  • Scoping and group classification support
  • CbCR / Qualified Financial Statement qualification
  • Transitional safe harbour assessments and long-term modelling
  • GIR preparation for Canadian headed groups

Audit provision (IAS 12)

  • Pillar Two financial statement disclosure support for FY2025
  • ETR/top-up modelling and scenario analysis
  • Audit ready documentation packages

To discuss how Pillar Two may affect your organization, please contact:

Harry Chana
Partner, International & Cross Border Tax Services Leader
Contact View bio
Ram Rathod
Partner, Tax
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The information in this publication is current as of March 3, 2026.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.