Agefi Luxembourg - octobre 2026

Octobre 2026 37 AGEFI Luxembourg Emploi & Droit T his is the first of a twopart article examining the practical implica­ tions of Pillar Two compliance. PartOne focuses on the lessons learned fromthe first filing cycle.With the first Pillar Two filing seasonnowbehind us (1) ,multinational groups have gai­ nedvaluable insight into the prac­ tical aspects of compliance. For many, the experience demonstra­ ted that the greatest challenges laynot in the calculation itself, but in the processes required to transformaccountingdata intoPillar Two calculations and a compliant filing. Further, groups had to coordinate local registrations, notifications, the first Global AntiBase Erosion (GloBE) Information Return (GIR) and where rele­ vant,topuptaxreturnsandpayments.Thefirstcom­ pliance cycle exposed practical challenges relating to data governance, the use of CountrybyCountry Reporting(CbCR)information,elections,filingportals and central filing arrangements. InPartTwo,wewilllookaheadtothenextfilingcycle and examine the key developments groups should now prepare for, including the shorter timetable(2), the introduction of the Undertaxed Profits Rule (UTPR), the need to refresh safeharbor assessments, and the importance of embedding Pillar Two into a controlled annual compliance process. The calculation is only the starting point Forseveralyears,groupsfocusedonPillarTwoimpact assessments,forecastsandsafeharbormodeling.The first filing season changed the exercise. Pillar Two became anoperational complianceobligation requir­ ing groups to turn technical conclusions into reportabledata,registrations,notifications,taxreturns andpayments. In Luxembourg, a functional Pillar Two filing infra­ structure for registration, the GIR and the local top­ up tax return was already available through MyGuichet.luinJanuary2026,wellbeforemanyother countries.Calendaryeargroupswithinthe2024scope were required to complete the relevant Luxembourg filings by June 30, 2026. Luxembourg constituent entities also had to be con­ sidered separately for registration purposes, even where the GIR itself was filed centrally or the local topuptaxreturnwasmanagedthroughadesignated entity. This was one of the first practical lessons: a group may perform most calculations centrally, but its compliance footprint remains entityspecific and jurisdictionspecific. The next filing season should therefore begin with a compliance matrix identifying, for each jurisdiction andentity, thefilingobligation, filing entity, deadline, notificationrequirement,paymentresponsibilityand exchange position. Reliable entity data is essential for filing Some of the most persistent difficulties in meeting compliancerequirementsinthepastfilingcyclearose from inconsistent legal and administrative informa­ tion: entity names, tax identification numbers, ulti­ mate parent details and group entry dates which delayedfiling in some cases. These issues were particularly relevant for entities withlimitedtaxcomplianceactivity,permanentestab­ lishments, entities in liquidation, newly acquired or disposed businesses, and certain investment or secu­ ritization structures. The lesson is straightforward: master data must be treated as an early workstream. Entity inventories should be reconciled with the legal structure chart, consolidation perimeter, CbCR, statutory accounts and local tax records, andupdated as changes occur. Classificationdecisions affect thewhole filing process The first compliance cycle also demonstrated that Pillar Two classification cannot simply be read from the legal structure chart. The GloBE treatment of an entitymaydiffer fromits classification for corporate income tax, accounting or company law purposes. Particular attentionmay have to be paid to partner­ ships, transparent entities, reverse hybrids, perma­ nent establishments, joint ventures, investment enti­ ties, securitization structures and entities that are treated as stateless or otherwise require specific analysis under the GloBE rules. Permanent establishments are a good example. Groups often had to consider whether a presence was relevant by reference to domestic law, a tax treatyor thePillarTwodefinition itself. That analysis shouldnot be left implicit, becausedifferent answers mayaffect the entity classificationand the allocation of income, taxes and other elements relevant for the Pillar Two computations. In Luxembourg, classification conclusions may be particularlyimportantwherestructuresincludepart­ nerships, investment arrangements and securitiza­ tionvehicles.Theseconclusionsaffectwhereincome, taxes, employees and tangible assets enter the calcu­ lation, and may also affect registrations, topup tax allocation and the GIR. They should therefore be documented in a short, reviewable memorandum mapped to the relevant data. The choice of financial data is not always obvious TheTransitionalCountrybyCountryReportingSafe Harbor (TCSH) was intended to reduce the compli­ anceburdenduringtheinitialyears.Inpractice,itcre­ ated its own data and interpretation questions. Groups had to determinewhether their CbCRwas a Qualified CbCR prepared using Qualified Financial Statements, whether the figures could be traced to those statements and whether required adjustments were applied correctly and consistently. Twodistinct risks emerged. First, the accounting standard used to prepare the CbCR could itself determine whether a jurisdiction met the TCSH tests: a jurisdiction meeting one of the tests under one standard could fail it under another, depending on which accountswere used. Second, mixing data from different Qualified Financial Statements within thesamejurisdictionalsafeharborcom­ putation or adjusting that data beyond veryrestrictiverules,disqualifiesthe jurisdiction fromtheTCSHentirely. The same point applies toQualified Domestic Minimum Topup Tax (QDMTT) computations. Local QDMTT rulesmayprescribeparticular accounting standards. The data used for TCSH, the GloBE computation, Income Inclusion Rule (IIR), UTPR and QDMTT purposes cannot be assumed to be interchangeable. For FY2025, groups shouldprepare a sourceofdata note, identifying the financial statements used and the applicable accounting standard. Also, the re­ maining timebefore theFY2025CbCRdeadline can be used to correct inconsistent entity mapping and improve the supporting audit trail, where relevant. Central filing still requires localmonitoring TheGIRmust be filed by the ultimate parent entity or a designated filing entity and is then exchanged with the relevant tax administrations, provided the necessary exchange arrangements are inplace. The first cycle showed that the timing gap between the 30 June 2026 central filing deadline and the 31 December 2026 exchange deadline required local monitoring of whether entities could rely on a GIR filed in another jurisdiction. An Organization for Economic Cooperation and Development (OECD) common understanding of May 18, 2026 addressed this gap: implementing jurisdictions, including Luxembourg, agreed not to enforce local filing or penalties in themeantime, provided the GIR was centrally filed on time in one of 33 listed jurisdictions and the required noti­ fication was made locally. In Luxembourg, this local notification is not a sepa­ rate filing, the GIR filing entity and jurisdiction are identifiedaspartoflocalregistration.Groupsshould therefore document the filing proof of the GIR, ensure the registration is properlymade, andmoni­ tor whether the exchange with Luxembourg has actually takenplace byDecember 31, 2026, as other­ wise a local GIRfilingmay be due. For the next filing cycle, groups should also recon­ firmwhether the same filing arrangements remain applicable or whether filings in additional jurisdic­ tions are required. Successful filing requires more than a complete return The first filingmade clear that a technically complete return does not guarantee a smooth submission. Extensible Markup Language (XML) preparation introduced format and validation requirements that were unfamiliar to many tax teams. A file could be technically sound but still generate errors because of a missing identifier, inconsistent entity reference or mismatch between registration and return data. The Luxembourg portal was remarkably stable and pro­ duced few errors but some jurisdictions’ reporting toolsprovedlesspredictable.Toavoiddelays,groups shouldgenerate the XMLandperformthe uploadof the GIR early enough so that should any validation errors be triggered, there is sufficient time to take actionwithin the filingdeadline. Governancematters as much as technical expertise Pillar Two cuts across accounting, CbCR, legal entity management, tax compliance and technology. The first filing season showed that unclear governance could create avoidable delays. Groups should move to a documented governance framework. Each data point should have an owner, source, reviewer and deliverydate.Technicaldecisionsandelectionsshould be recorded in a decision log. In particular, the elections made for FY 2024 should be tracked, and any elections available for later years should be analyzed for both current and futureyear consequences. Also, changes to the group structure should feed into the Pillar Two process during the year, ideally with a highlevel impact assessment for material transactions. The key lesson: move froma project to a controlledprocess Starting from the FY 2024 filing record, groups should perform a postfiling review covering data gaps, manual adjustments, portal errors, late deci­ sions, unreconciled differences and unanticipated local filing requirements. Each issue identified should be traced to its root cause and translated into a specific remediationaction,withadesignated owner and target completion date. This structured approach helps standardize processes, distinguish isolated errors from recurring control weaknesses and ensure that lessons from the first filing cycle lead to measurable improvements. The first Pillar Two filing seasonwas often treated as an implementation project. That approach will be increasinglydifficulttosustain.PillarTwocompliance is now part of the annual tax cycle and needs to be connected to the financial closing, consolidation, CbCR, statutory accounts and local tax compliance. Thekeylessonfromthefirst filing cycle is not simply that Pillar Two is technically complex. It is that tech­ nical complexity becomes harder tomanage when data, responsibilities and filing processes are not organized inadvance. Thefirst filing cycle therefore leaves a clear priority: convert technical complexity into a structured, repeatable and wellgoverned compliance process. Having examined the practical lessons learned, Part Two will consider how groups can build on this foundation and prepareeffectivelyforthenextstageofPillarTwocompliance. Kristy FIERRO, Partner, International Tax and Transaction Services, EY Luxembourg Catarina RIBEIRO, Manager, International Tax and Transaction Services, EY Luxembourg 1) For multinational groups with a financial year corresponding to the calendaryear, 30 June 2026 marked the first major Pillar Two com­ pliance deadline in respect of financial year 2024. 2) For calendaryear groups, the next compliance deadline falls on 31 March 2027, three months earlier than the deadline applicable to the first reporting cycle. Pillar Two: Beyond the Calculation Lessons from the First Filing Season andWhat’s Next DominiqueMangiatordi CEOAI5&grand spécialiste en IA Jeudi 19 novembre de 11h45 à 14h00 Lunch Ecofin Club à l’Hôtel Parc Belair Goeres Hotels Luxembourg ʺLe (bon) Manager à lʹère de lʹ IA agentiqueʺ Paf membres : 75€ ttc pp (Apéro networking & lunch 3 services compris). Paf nonmembres : 85€ ttc pp en découverte et max. 1 visite avant adhésion. Àverser sur le compte bancaire : BIC GEBABEBB IBANBE73 0015 4949 3760 – Réf. 9/11 Lieu : 111, Avenue du X Septembre L2551 Luxembourg Parking dans lʹhôtel en fonction des disponibilités Info club & devenir membre : www.ecofinclub.lu didier.roelands@ecofinclub.lu