The Qualified Domestic Minimum Top-up Tax, or QDMTT, is how a country claims first rights to the revenue generated by the Pillar Two global minimum tax. Under the OECD/G20 Pillar Two framework, multinational groups with consolidated annual revenue above €750 million must pay an effective tax rate of at least 15% in every jurisdiction where they operate. A QDMTT lets the country where the profits arise collect the shortfall itself, before any foreign government can step in through the Income Inclusion Rule or the Undertaxed Profits Rule.
Why the QDMTT Comes First
Pillar Two enforces its 15% floor through the Global Anti-Base Erosion (GloBE) rules. Two collection mechanisms do most of the work. The Income Inclusion Rule (IIR) lets a parent company’s home country collect top-up tax on low-taxed foreign subsidiaries. The Undertaxed Profits Rule (UTPR) is a backstop that lets other jurisdictions collect if the IIR doesn’t cover the gap. Both mechanisms move revenue away from the country where the profits were actually earned.
The QDMTT flips that. Countries that enact a qualifying domestic minimum tax sit at the top of the collection order: QDMTT applies before the IIR, and the IIR applies before the UTPR.1OECD. Global Anti-Base Erosion Model Rules (Pillar Two) Any top-up tax collected under a QDMTT reduces what the IIR or UTPR can claim, dollar for dollar. That priority is why more than 60 jurisdictions had enacted some form of domestic minimum top-up tax by early 2026. Either they collect it, or a foreign treasury will.
Which Companies Are In Scope
A QDMTT applies to multinational enterprise (MNE) groups whose consolidated annual revenue exceeds €750 million in at least two of the four fiscal years immediately before the reporting year.2OECD. Minimum Tax Implementation Handbook (Pillar Two) Jurisdictions that don’t use the euro convert the threshold using an exchange rate published by the OECD Secretary-General, pegged to the last day of the fiscal year preceding the reporting year.
Inside an in-scope group, small operations can still be excluded. The framework offers an optional de minimis carve-out: if a jurisdiction’s constituent entities have average revenue below €10 million and average income below €1 million (averaged over the current year and two prior years), that jurisdiction can be excluded from the top-up calculation. Below the €750 million group threshold, Pillar Two doesn’t apply at all.
What Makes a Domestic Minimum Tax “Qualified”
Not every domestic minimum tax earns the “Qualified” label, and the label is what carries the legal effect. Only a QDMTT that satisfies OECD Inclusive Framework standards will be credited against IIR or UTPR liabilities in other jurisdictions.3OECD. Central Record of Legislation With Transitional Qualified Status A domestic minimum tax that fails those tests is just an additional tax, with no protective effect against foreign collection. Three standards do the qualifying work.
Consistency With the GloBE Rules
A QDMTT’s calculations must produce the same outcomes as the GloBE rules, except where the GloBE commentary explicitly permits deviation.3OECD. Central Record of Legislation With Transitional Qualified Status Domestic law must use the same definitions for GloBE Income or Loss and Covered Taxes as the Model Rules, and the QDMTT cannot compute a top-up smaller than the standard GloBE calculation would produce. A jurisdiction cannot quietly design its QDMTT to run lighter than the global rules.
Administration
The jurisdiction has to run a monitoring process, enforce filing requirements, and provide dispute resolution consistent with the GloBE framework. Sloppy administration can strip a jurisdiction of qualified status, which in turn exposes its MNEs to duplicate top-up claims from foreign countries.
No Related Benefits
A domestic minimum tax loses qualified status if the jurisdiction provides “Related Benefits” that undermine the 15% floor. This targets schemes where a country nominally collects the top-up tax but then hands the money back through credits, grants, or other advantages that pull the true burden below 15%. The Inclusive Framework reviews the full legislative package, not the QDMTT statute in isolation.
How the Top-Up Tax Is Calculated
The QDMTT calculation tracks the standard GloBE effective tax rate (ETR) computation and works on a jurisdictional basis: every entity of the group inside one country is blended together. Five steps.
Step 1: Determine GloBE Income or Loss
Start with the financial accounting net income or loss of each entity in the jurisdiction, as reported in the ultimate parent’s consolidated financial statements. Apply adjustments that neutralize items like intercompany dividends, gains or losses on ownership interests, and certain equity-method results. Summed across the jurisdiction, that gives aggregate GloBE Income.
Step 2: Calculate Adjusted Covered Taxes
Covered Taxes are the ETR numerator. Start with each entity’s current income tax expense and add deferred tax expense. Deferred taxes then get several adjustments: amounts tied to uncertain tax positions are excluded, and re-measurements of deferred tax liabilities caused by rate changes are stripped out. A recapture rule also applies: if a deferred tax liability hasn’t reversed within five years of being recorded, the MNE recomputes its ETR as if the liability never existed and pays any additional top-up tax that results. That keeps companies from booking deferred liabilities indefinitely to inflate their reported rate.
Step 3: Compute the Effective Tax Rate
Divide Adjusted Covered Taxes by aggregate GloBE Income. At 15% or above, no top-up tax is due for the jurisdiction. Below 15%, the calculation continues.
Step 4: Find the Top-Up Tax Percentage
Subtract the jurisdictional ETR from 15%. An 11% ETR produces a 4% top-up percentage. That gap is what the QDMTT fills.
Step 5: Apply the Percentage to Excess Profit
The top-up percentage applies not to full GloBE Income but to “Excess Profit,” which is GloBE Income minus the Substance-Based Income Exclusion (SBIE). The SBIE protects income tied to real economic activity by carving out a fixed return on eligible payroll costs and tangible assets in the jurisdiction. The initial formula set the carve-outs at 10% of payroll and 8% of tangible assets, phasing down 0.2 percentage points per year during the first six transition years and more steeply afterward, reaching 5% each by the early 2030s. For fiscal years beginning in 2026, the applicable rates are roughly 9.6% for payroll and 7.6% for tangible assets.
A simplified example: an MNE has €50 million in GloBE Income in a jurisdiction with an ETR of 10%. The SBIE carve-out totals €8 million, leaving Excess Profit of €42 million. The top-up percentage is 5% (15% minus 10%). The QDMTT owed is €2.1 million.
The QDMTT Safe Harbor
Qualification is one bar. The QDMTT Safe Harbor is a higher one, and it changes what the MNE actually has to compute. A QDMTT that meets three additional standards, the Accounting Standard, the Consistency Standard, and the Administration Standard, activates the safe harbor. When it applies, top-up tax for that jurisdiction is treated as zero for IIR and UTPR purposes.4OECD. Qualified Status Under the Global Minimum Tax – Questions and Answers The practical effect is that MNEs skip the parallel GloBE calculation for that jurisdiction when preparing their global filings, cutting substantial compliance work.
The Accounting Standard lets a QDMTT rely on a local financial accounting framework rather than the parent’s consolidated reporting standard, provided certain conditions are met. The Consistency Standard keeps the domestic computation close enough to the Model Rules that foreign tax authorities can rely on the QDMTT result. If a jurisdiction’s safe harbor status lapses through legislative changes or inconsistent administration, MNEs there are back to running dual calculations.
What This Means for U.S.-Parented Groups
The United States has not enacted a QDMTT and, as of 2026, has no plans to. A Presidential Memorandum issued on January 20, 2025 declared that the OECD Global Tax Deal “has no force or effect in the United States” absent an act of Congress adopting its provisions.5The White House. The Organization for Economic Co-operation and Development (OECD) Global Tax Deal In January 2026, the Treasury Department announced an agreement with the more than 145 countries in the Inclusive Framework under which U.S.-headquartered companies remain subject only to U.S. global minimum taxes and are exempted from Pillar Two.6U.S. Department of the Treasury. Treasury Secures Agreement to Exempt U.S.-Headquartered Companies From Biden Global Tax Plan
The U.S. already has its own minimum tax on foreign earnings, the Global Intangible Low-Taxed Income (GILTI) regime, but GILTI doesn’t mirror Pillar Two in several respects and has not been submitted for recognition as a QDMTT. The 2026 agreement is described as protecting “the value of the U.S. R&D credit and other Congressionally approved incentives” from being undermined by foreign top-up taxes.6U.S. Department of the Treasury. Treasury Secures Agreement to Exempt U.S.-Headquartered Companies From Biden Global Tax Plan
The exemption has limits worth flagging. It shields U.S.-headquartered groups from Pillar Two top-up taxes being applied to their U.S. profits by foreign governments. It does not eliminate the QDMTT liability that a U.S. group’s foreign subsidiaries owe in countries that have adopted a QDMTT, such as Australia, the United Kingdom, or South Korea. And because the arrangement rests on diplomatic commitments rather than treaty obligations, its durability across future administrations is untested.
On the credit side, IRS Notice 2023-80 draws a clear line. QDMTTs are generally treated the same as any other foreign income tax for U.S. foreign tax credit purposes, because they are imposed by the jurisdiction where the income arises and don’t involve cross-border tax claims. IIR and UTPR top-up taxes get different treatment under the notice, with special rules that can deny creditability for “final” top-up taxes that take into account tax imposed by other countries, including U.S. GILTI. A QDMTT, which by definition looks only at the domestic ETR, avoids that circularity problem.
Filing Obligations and Deadlines
MNE groups subject to a QDMTT face two overlapping sets of filings: the domestic QDMTT return in each adopting jurisdiction, and the GloBE Information Return (GIR), the standardized global disclosure required by the Inclusive Framework.7OECD. Compilation of Additional GloBE Information Reporting Requirements The GIR captures jurisdiction-by-jurisdiction GloBE calculations, ETRs, safe harbor elections, and top-up tax amounts.
The GIR is due within 15 months of the end of the reporting fiscal year. The first-ever GIR filing gets an extra three months, for 18 months total. The initial wave of GIR filings is expected to be due by June 30, 2026, covering fiscal years that began on or after December 31, 2023.7OECD. Compilation of Additional GloBE Information Reporting Requirements Individual jurisdictions may impose earlier or additional domestic deadlines for their QDMTT returns, so both timelines have to be tracked.
Getting the QDMTT payment accurately reflected in the GIR matters, because that payment is what triggers the credit against any IIR or UTPR liability. A misreported or missing QDMTT amount leaves a foreign tax authority with no basis to reduce its own top-up claim. Three practical friction points tend to appear. Accounting standards create the first, when the QDMTT jurisdiction permits or requires local GAAP while the GIR relies on the parent’s consolidated reporting standard, and the two have to be reconciled. Fiscal year mismatches create the second: conversion rules apply when a domestic tax year doesn’t align with the GloBE fiscal year, and errors cascade through every downstream figure. Interpretive differences create the third, because judgment calls on Covered Taxes and the SBIE aren’t always read the same way by different tax authorities.
The Inclusive Framework has agreed on transitional penalty relief for the early implementation years. Jurisdictions are expected to waive or reduce penalties for good-faith compliance failures during the initial transition, provided the MNE has taken reasonable steps to comply with the GloBE rules. Specific penalty amounts and enforcement mechanisms vary by country, since the OECD sets the framework and individual jurisdictions define the penalties in their own law.