OECD Pillar Two and CbCR: Why an Existing Compliance Obligation May Become a Valuable Pillar Two Too


As Thailand moves into the first year of OECD Pillar Two implementation, many multinational enterprise (MNE) groups are focusing their attention on understanding effective tax rates, top-up tax calculations and new filing requirements. Yet one of the most valuable Pillar Two tools may already exist within the organisation: Country-by-Country Reporting (CbCR).
At first glance, CbCR and Pillar Two appear to serve different purposes. CbCR is primarily a transparency measure that requires large MNE groups to provide tax authorities with information on revenues, profits, taxes and economic activity across jurisdictions. Pillar Two, by contrast, introduces a global minimum tax framework designed to ensure that multinational profits are subject to a minimum level of taxation.
However, the two regimes share a common origin. Both emerged from the OECD/G20 Base Erosion and Profit Shifting (BEPS) project and both target large multinational groups with consolidated annual revenue of at least EUR 750 million.  More importantly, CbCR data now serves as the gateway to Safe Harbour relief under Pillar Two. For MNEs that satisfy the relevant conditions, this can significantly reduce compliance burdens by allowing reliance on simplified calculations instead of a full GloBE determination. If Thailand implements the Side-by-Side Package, the availability of the Transitional CbCR Safe Harbour would be extended through fiscal year 2027, providing qualifying MNEs with an additional year of simplified compliance.

From Transparency to Compliance Relief
For many years, CbCR was viewed primarily as a reporting exercise. Today, it may serve a much broader purpose.
Under the OECD's Transitional CbCR Safe Harbour, qualifying jurisdictions may be exempt from detailed Global Anti-Base Erosion (GloBE) calculations during the transition period. Where the safe harbour applies, the jurisdiction is effectively treated as generating no Pillar Two top-up tax for that year.
This is a significant simplification. A full GloBE calculation can require extensive data gathering, adjustments to accounting information and detailed technical analysis. By contrast, the transitional safe harbour allows eligible groups to rely on information that is already available from a Qualified CbC Report and Qualified Financial Statements.
For multinational groups facing the practical challenges of early Pillar Two implementation, the ability to bypass full calculations in lower-risk jurisdictions can substantially reduce compliance costs and administrative burdens.

Three Gateways to Safe Harbour Relief
The Transitional CbCR Safe Harbour is available if any one of three (3) tests below is satisfied.
  1. De Minimis Test: A jurisdiction qualifies where it reports less than EUR 10 million of revenue and less than EUR 1 million of profit before income tax. The rationale is straightforward: jurisdictions with very limited activities are unlikely to generate material Pillar Two risk.
  2. Simplified Effective Tax Rate Test: This test focuses on whether the jurisdiction already appears to be taxed at a sufficiently high level based on simplified calculations derived from CbCR information. If the jurisdiction's simplified effective tax rate exceeds the prescribed threshold, no further GloBE calculation is required.
  3. Routine Profits Test: Under this test, a jurisdiction may qualify if its profits before income tax do not exceed the Substance-Based Income Exclusion amount. In practical terms, this means that profits are broadly aligned with the level of payroll and tangible assets located in the jurisdiction. The OECD considers such profits less likely to reflect base erosion concerns that Pillar Two was designed to address.
Notably, the MNE group only needs to satisfy one of these tests for a particular jurisdiction in order to access the safe harbour.

Additional Relief Through the OECD Side-by-Side Package
The relevance of the Transitional CbCR Safe Harbour increased further when the OECD Inclusive Framework released its Side-by-Side Package in January 2026. Among a number of simplification measures, the package extended the Transitional CbCR Safe Harbour by an additional year, allowing eligible MNE Groups to continue benefiting from the relief through fiscal year 2027. The original safe harbour was intended to provide temporary relief while businesses adapted to the Pillar Two regime. However, recognising the significant compliance burden associated with full GloBE calculations, the Inclusive Framework agreed to grant taxpayers additional time before transitioning to the full rules.
Assuming Thailand adopts the Side-by-Side Package, qualifying MNE Groups with operations in Thailand could continue to rely on the Transitional CbCR Safe Harbour through fiscal year 2027. For qualifying MNEs, this would defer the need to perform full GloBE calculations in every jurisdiction for an additional year, provided the relevant safe harbour conditions continue to be satisfied.

Why Data Quality Suddenly Matters More
The growing importance of CbCR within the Pillar Two framework creates a new challenge for many tax departments.
Historically, some groups viewed CbCR as a disclosure obligation with limited operational consequences. Under Pillar Two, that mindset may no longer be appropriate. The accuracy of revenue, profit and tax information reported through CbCR can now influence access to safe harbour benefits and determine whether more extensive calculations are required.
As a result, data governance, consistency of reporting positions and alignment between tax and finance functions are becoming increasingly important. Weaknesses that previously created only CbCR compliance concerns may now have direct implications for Pillar Two compliance costs and risk management.

BDO Insight
Thailand's Pillar Two regime applies to fiscal years beginning on or after 1 January 2025 and incorporates the QDMTT, IIR, and UTPR.
While much of the attention has focused on effective tax rates and top-up taxes, MNE Groups should first assess whether safe harbour relief is available before undertaking full GloBE calculations. The Transitional CbCR Safe Harbour illustrates how an existing compliance obligation can become a practical Pillar Two simplification tool.
Assuming Thailand adopts the OECD's Side-by-Side Package, eligible MNEs could continue to benefit from the Transitional CbCR Safe Harbour through fiscal year 2027, allowing them to focus resources on higher-risk areas while deferring detailed GloBE calculations where simplified treatment is available.