Expert Opinion : Pillar 2

It is widely acknowledged that many groups falling within the scope of the Pillar 2 regulations will not be ready to provide all the information required for the GloBE Information Return (GIR), which must be filed for the first time on June 30, 2026.

However, the situation for these groups is not hopeless. Here are two words of advice for them.

Recommendation n°1 : Don’t choose not to file a GIR!

Admittedly, a perusal of the GIR template published by the OECD earlier this year (Tax Challenges Arising from the Digitalization of the Economy – GloBE Information Return (January 2025) | OECD) can discourage even the most motivated from stepping up their efforts to comply with the regulations. The French tax administration has not yet published the French version, which according to our information is scheduled for early 2026, but it should be identical or virtually identical to the OECD template, with references to the French tax code (FTC) rather than the OECD Model Rules.

The first question is who must file this return.

From this point of view, the law is clear. 

In principle, each constituent entity must prepare a GIR concerning itself, and itself alone. However, Article 223 WW bis of the FTC provides for alternatives, which will undoubtedly be useful to all groups subject to Pillar 2.

Let's take the example of a French subsidiary of a group whose parent company is Spanish and subject to Pillar 2. In our experience, it is likely that the Spanish parent company will file a single GIR covering all the jurisdictions and entities concerned by the return with its Spanish tax administration, which will then be responsible for communicating the part of the GIR relating to each jurisdiction to the relevant tax administration. It is therefore the Spanish administration that will provide the French administration with the part of the GIR relating to the “France” jurisdiction, and thus the French subsidiary's data. The subsidiary will not have to file a GIR in this case. However, it is crucial to ensure that Spain has concluded a bilateral or multilateral agreement or any other agreement with France governing the automatic exchange of information returns relating to a top-up tax. This will certainly be the case, since a European DAC 9 Directive on this automatic exchange is currently in the process of transposition. 

Conversely, a French "Pillar 2" group head will, in all likelihood, file the GIR in France for all its in-scope entities. This is possible, and even desirable in most cases, but it must be ensured that (i) the local "Pillar 2" regulations applicable to each entity exempt that entity from filing the GIR if the parent company (for example) does so, and (ii) that the jurisdiction to which that entity belongs and France exchange information on the GIR. 

In summary, it is crucial that the "Pillar 2" group and its constituent entities are clear about "who files what" and that the relevant administrations are informed accpordingly, for example via the declaration of income (this is the case for France, with part 3 of section II of form no. 2065-INT). 

Once this initial organizational issue has been resolved, the group can consider what will happen if the return is not filed, or is filed too late, or contains inaccuracies.

In theory, Article 1729 F bis of the FTC stipulates that a fine of €100,000 may be imposed in the event of failure to file or late filing of the GIR or the statement of payment of top-up tax (relevé de liquidation). The fine may not exceed €50,000 per return for all other breaches of the reporting requirements provided for in Article 223 WW of the FTC, such as the filing of an incomplete or incorrect GIR. Furthermore, Article 1729 F bis II of the FTC provides for a €1 million cap on fixed fines incurred for a given fiscal year. This clearly applies to groups in which several GIRs are filed containing only the information of a single constituent entity.

Few countries have chosen, like France, to penalize breaches of reporting requirements as soon as the system comes into force. Will this induce the French authorities to show leniency, at least during an initial “learning” period? This is doubtful, as the administration has already sent out reminders to a large number of French constituent entities that had not filed or had not correctly filed their 2065-INT form on time, reminding them of the applicable penalties.

Let us return to our examples above.

Assuming the French subsidiary of the Spanish group is exempt from filing the GIR concerning it (see the above summary of conditions), it will not be subject to the abovementioned penalties. However, it should check what it indicated in part 3 of section II of the 2065-INT form it filed.

The French "Pillar 2" group head, which, hypothetically, will file the GIR for all its constituent entities, should not, in our opinion, take the risk of missing the June 30, 2026 deadline (or the 18-month period following the group's fiscal year-end date if that date is after December 31, 2024), unless it is willing to incur a penalty that is not entirely symbolic and is easy to apply... 

 Recommendation n °2 : Don't be intimidated by the apparent complexity of the GIR

For French entities (whether they are simply constituent entities or "Pillar 2" group heads) required to file the GIR even though their "Pillar 2" project has not yet started or has only just started, our recommendation is to first take a step back from the information required in this return and to make the most of all the simplification measures available to them. 

For example, the decree of December 4, 2024, provides for the possibility of opting for a transitional simplified reporting mechanism when the following two conditions are met:

• the fiscal year covered by the option began no later than December 31, 2028, and ended no later than June 30, 2030;

• no top-up tax requiring allocation between the constituent entities is due by the MNE group or national group in the State or territory concerned.

The decree thus refers to the safe harbour scheme (temporary at this stage, intended to last for three fiscal years in principle, but which could be made permanent in the long run) provided for in Article 223 VZ bis of the FTC, which offers the possibility for the Pillar 2 top-up tax amount to be deemed nil if certain tests based on data from a qualified CbCR are met (the declaration of income, in the case of large domestic groups). 

This option allows for a very substantial reduction in the information to be provided in the GIR statement concerning the detailed calculation of the ratio items used to compute the jurisdiction's ETR. To benefit from this mechanism, it is essential to be able to demonstrate that the CbCR is qualified within the meaning of the OECD commentary, which should prompt groups to thoroughly review, as a matter of priority, their CbCR process and to prepare their CbCR preferably on the basis of consolidated financial statement data.

Let's take the example of a "Pillar 2" group with a French head company and operations in four jurisdictions outside France: Germany, Italy, Spain, and Morocco.

Only Germany and Italy, in addition to France, generated a profit for the 2024 fiscal year. 

As a result, provided that the CbCR tests are correctly applied, Morocco and Spain should benefit from the "routine profit" test due to their net losses. 

It is also likely that Germany, Italy, and France, which have relatively high tax rates, will meet the "simplified ETR" test. 

Under these conditions, the group could avoid having to perform detailed calculations for all the jurisdictions in which it operates, which will greatly simplify the task of those responsible for preparing the GIR.