THE year 2026 has been an eventful year thus far for Pillar Two Global Minimum Tax (hereinafter referred to as GMT).
On Jan 5, 2026, the group of 20/OECD Inclusive Framework (OECD IF) published the highly anticipated Side-by-Side Package, which cemented GMT as a permanent fixture in the global tax landscape.
On June 30, 2026, marked the first-ever submission deadline of the GloBE Information Return (GIR), a date that multinationals and taxpayers alike will undoubtedly remember as a significant milestone in ending the race to the bottom.
Most recently on Sept 11, 2026, the OECD IF published a collection of documents, which notably included an updated GIR to be used for fiscal years beginning on or after Dec 31, 2025.
In short, the writing is on the wall – GMT is not going away anytime soon.
As we inch ever closer towards March 31, 2027, for example, the Year 2 GIR submission deadline for MNE Groups with a calendar year-end, there is no better time than now to reflect on the challenges leading up to June 30, 2026, the unexpected surprises along the way and how we can better prepare for the next wave.
What is GMT?
As a recap, the GMT regime was first introduced by the OECD IF in December 2021 with the release of the GloBE Model Rules.
The regime was designed to ensure that large multinationals are taxed at a minimum effective tax rate of 15% in all jurisdictions in which it operates, failing which would trigger top-up tax exposure.
With money on the table, over 140 countries around the world have committed to implementing the framework.
The GMT regime in Malaysia is also effective for fiscal years beginning on or after Jan 1, 2025.
A filing season unlike any other
The novelty of the regime posed a significant challenge, as expected.
It was the first time for everyone; forms, systems and processes were new to taxpayers, tax practitioners and governments.
There was no “same as last year” reference to provide a starting point and preparation time was compressed due to delays on all fronts.
It was also the first time we had to file globally, with considerable effort and coordination needed to manage different time zones.
GMT adoption in different countries introduced local nuances, which necessitated the involvement of local experts.
Interpretational differences, technical deviations and specific local requirements created unprecedented complexity, further compounding the enormous time pressure. Unfortunately, the same challenges will likely be present in Year 2.
Due to deferred implementation in many countries outside Europe, 2025 will be the first calendar year in which GMT applies at scale, applying to many more countries like Malaysia and our South-East Asian neighbours.
Hence, we can expect the number and complexity of filings to increase exponentially, especially for multinationals with wider global footprints.
Year 2 starts now
There is simply no time to rest on our laurels.
The Year 2 compliance season is three months shorter than Year 1 and for calendar year-end groups, the March 31 deadline naturally conflicts with other year-end financial reporting commitments.
Thus, it is imperative that taxpayers adopt a proactive approach to avoid the pain points that plagued Year 1.
Before any computations can commence, a refreshed parameter identification exercise should be completed to ensure that changes in group structure during the year are properly documented and factored in.
Accurate scoping and entity classification are the first and most important steps in the process, as this paves the path for everything else.
Since the introduction of the Transitional Country-by-Country Report (CbCR) Safe Harbour, the CbCR has become an invaluable tool in simplifying GMT compliance and, more importantly, eliminating top-up tax exposure.
In this regard, taxpayers are strongly encouraged to prepare the CbCR earlier ahead of its standard 12-month deadline to allow a much-needed head start to GMT compliance.
A qualified CBCR is a prerequisite to relying on the Safe Harbour, and ensuring that it fulfils all the requirements is non-negotiable.
Moreover, the presence of Hybrid Arbitrage Arrangements and Net Unrealised Fair Value Losses could be decisive between ‘pass’ or ‘fail’ and hence should be carefully reviewed and considered.
As for jurisdictions that would not fall within the Transitional CbCR Safe Harbour, preparation of the full-scale Effective Tax Rate and top-up tax computations should commence as soon as the relevant financial accounts are ready.
Data granularity and tracking of GMT-specific attributes were amongst the headline challenges faced in Year 1 and taxpayers can expect to face the same growing pains.
Many businesses realised that a vast majority GMT datapoints were not readily extractable from existing infrastructure, resulting in a last-minute rush to gather figures from every conceivable source.
Looking beyond compliance – What’s next for tax incentives?
Malaysia has historically relied on traditional tax incentives such as Pioneer Status and Investment Tax Allowance to attract foreign direct investments.
The new floor of 15% has raised a fundamental yet crucial question – does GMT spell the end of tax incentives?
Fortunately, the answer is a resounding ‘No’ but it is evident that the current incentive landscape will never look the same.
The OECD introduced the concept of Qualified Refundable Tax Credit (QRTC) back in 2021, which essentially represents a new class of tax incentives designed to be “GMT-friendly”.
In a nutshell, it is a credit that first allows the company to offset its taxes dollar-for-dollar, and if the credit has not been fully utilised after four years, the remaining amount would be refunded to the taxpayer in cash or made available as cash equivalents. Unlike a traditional tax incentive, which reduces the numerator of the effective tax rate calculation, it increases the denominator instead.
They followed it up by introducing the Substance-based Tax Incentive (“SBTI”) Safe Harbour and a new concept of Qualified Tax Incentive (QTI) via the Side-by-Side Package in early 2026.
In brief, if the taxpayer is granted a QTI, it can opt for the SBTI Safe Harbour, which effectively eliminates the top-up tax that would have arisen due to the same QTI.
Hence, as the QTI definition applies to both expenditure-based and production-based tax incentives, a common question that taxpayers have been asking is whether Investment Tax Allowance is a QTI.
An election can also be made to treat the QRTC as a QTI provided that the requisite conditions are met.
The implementation of a Strategic Investment Tax Credit (for example, the Malaysian iteration of the QRTC) was teased in the 2025 Budget.
Coupled with the latest developments on the SBTI Safe Harbour, all eyes are on the 2027 Budget to see what comes next.
Nonetheless, a ‘one size fits all’ approach should not be the de facto inclination.
The onus will be on taxpayers to assess what is best for them moving forward, taking into account key factors such as jurisdictional blending, legacy tax attributes, transition rules, interaction with Safe Harbours, etc.
What comes next
GMT has ushered us in a new dawn of international taxation riddled with dynamism and uncertainty. Like it or loathe it, GMT is here to stay, and it will permeate every aspect of taxation.
Whether it be intragroup financing, corporate restructuring, cross-border expansion or incentive application, the implications of GMT must be carefully considered to avoid unanticipated exposure.
Understanding the interplay between different Safe Harbours and opting for the right Elections will be key in safely navigating the complexities of the regime and sustaining tax efficiency along the way.
Kelvin Yee is an International Tax Partner of Deloitte Malaysia. The views expressed here are the writer’s own.
