Understanding Pillar Two and QDMTT Implementation

The global minimum corporate tax introduced under the OECD/G20 Inclusive Framework (Pillar Two) represents a fundamental reform designed to ensure that multinational enterprise (MNE) groups with annual consolidated revenue exceeding €750 million are subject to a minimum effective tax rate (ETR) of 15% in each jurisdiction where they operate.

Where the effective tax rate in a given jurisdiction falls below 15%, a top-up tax mechanism applies.

Pillar Two Mechanisms

Income Inclusion Rule (IIR)

Under the IIR, the parent entity’s jurisdiction imposes a top-up tax on low-taxed subsidiaries within the group to bring the effective tax rate up to 15%.

Undertaxed Profits Rule (UTPR)

Where the IIR cannot be applied, other jurisdictions where the group operates may collect the top-up tax through expense disallowance or equivalent adjustments.

Filing and Payment Deadline (OECD Standard)

Under the OECD model rules:

• The return must generally be filed within 15 months following the end of the fiscal year.
• For the first year of implementation, this period may extend to 18 months.

Turkey’s Qualified Domestic Minimum Top-Up Tax (QDMTT)

To align with the OECD framework, Turkey has enacted a Qualified Domestic Minimum Top-Up Tax (QDMTT) under the Corporate Tax Law.

This mechanism ensures that if Turkish constituent entities of an in-scope MNE group have an effective tax rate below 15%, the top-up tax is collected domestically in Turkey rather than being collected by another jurisdiction under the IIR or UTPR.

Scope

Applies to Turkish constituent entities of multinational enterprise groups with consolidated annual revenue exceeding €750 million in at least two of the four preceding fiscal years.

Effective Tax Rate Threshold

Minimum effective tax rate: 15%

Calculation

• Calculated on an annual basis.
• Based on financial accounting income adjusted in accordance with Pillar Two rules.
• Provisional tax periods are not relevant for Pillar Two purposes.

Filing and Payment

In line with the Pillar Two framework adopted into Turkish law, the declaration is submitted within the period aligned with the OECD model rules (15 months, extended to 18 months for the first transition year).

Domestic Minimum Corporate Tax (Local Minimum Tax)

Separate from the OECD Pillar Two framework, Turkey has also introduced a Domestic Minimum Corporate Tax applicable to corporate taxpayers.

This measure is designed to prevent situations where companies reduce their corporate tax burden to negligible levels through excessive exemptions, deductions, or incentives.

Tax Base

The minimum tax base is calculated based on accounting profit before certain exemptions and deductions, subject to specific statutory adjustments.

Rate

10% minimum corporate tax

Comparison Mechanism

Taxpayers compare:

• Standard corporate tax (currently 25%), and
• The 10% domestic minimum corporate tax

The higher amount is payable.

Exemption for Newly Established Companies

Newly established entities are exempt from the domestic minimum corporate tax for their first three fiscal periods.

Filing

The domestic minimum tax is calculated within:

• Quarterly provisional corporate tax periods, and
• The annual corporate tax return.

Legislative Framework

The global and domestic minimum tax rules have been incorporated into the Corporate Tax Law No. 5520 through additional articles introduced in 2024.

Implementation details are further clarified through communiqués issued by the Turkish Revenue Administration (GİB).

The framework is currently fully integrated into Turkish corporate tax legislation and remains in force as of 2026.

Key Takeaways

• Pillar Two applies only to MNE groups exceeding the €750 million revenue threshold.
• Turkey’s QDMTT ensures that top-up tax relating to Turkish entities is collected domestically.
• The minimum effective tax rate under Pillar Two is 15%.
• Domestic Minimum Corporate Tax applies at a 10% threshold to prevent erosion of the Turkish tax base.
• These two regimes operate independently but may apply concurrently in different contexts.

Professional Advisory Note

The interaction between the OECD Pillar Two rules, Turkey’s QDMTT, and the Domestic Minimum Corporate Tax requires careful technical analysis, particularly in group structures involving tax incentives, R&D exemptions, free zone regimes, or investment incentives.

At ÖzbekCPA, we assist multinational groups and domestic corporations in:

• Assessing Pillar Two exposure,
• Calculating effective tax rates under QDMTT,
• Evaluating domestic minimum tax implications,
• Ensuring compliance with Turkish corporate tax legislation and OECD-aligned reporting requirements.

For professional advice on global and domestic minimum corporate tax obligations in Turkey, contact ÖzbekCPA.