BEPS 2.0 and GloBE: Legal Entity Design for GCCs

Global Minimum 15% Top-up Tax Under BEPS 2.0 

The OECD’s BEPS 2.0 addresses tax avoidance strategies by multinational enterprises (MNEs), which tend to shift profits to low- or no-tax jurisdictions. Under BEPS 2.0, a 15% global minimum tax has been introduced, enforced through a top-up tax mechanism.

If an MNE’s tax rate in any jurisdiction falls below 15%, it must pay an additional tax to bring the total taxation up to the minimum level. For GCC host countries, this represents a paradigm shift. Groups operating in the GCC with revenues above €750 million must calculate their jurisdictional effective tax rates. If these rates fall short, top-up liabilities will arise, even when statutory tax regimes are fully compliant.

BEPS 2.0 introduces new complexities for GCC businesses around tax planning and compliance. Factors such as substance-based income exclusions, effective tax rate (ETR) computation, and application of jurisdictional top-up taxes influence group structures. Transitional safe harbour provisions may provide temporary relief. 

Transitional Reliefs and Timing

The GloBE model rules introduce transitional relief to provide a soft landing as the global minimum tax framework is implemented. These reliefs cover simplified data requirements, use of consolidated financial accounts, and temporary safe harbours, allowing companies to gradually adjust to complex ETR and top-up tax calculations.

Transitional penalty relief ensures no punitive sanctions apply during the early years if an MNE demonstrates reasonable measures to comply. This is particularly relevant for GCC jurisdictions with relatively new tax systems.

For GCCs, timing considerations are critical. Most countries adopting BEPS 2.0 are aligning effective dates with fiscal years beginning on or after January 1, 2024. Transitional rules extend certain reliefs until 2026 or beyond, providing flexibility in designing entity structures, managing intercompany flows, and strengthening controls.

By leveraging transitional provisions, GCC-based MNEs can address compliance gaps, adapt cost-plus models, and refine GIR reporting. However, once the relief period ends, entities must ensure compliance with tax rules across all operations.

Substance, IP, and Intercompany Flows

BEPS 2.0 and the GloBE rules make substance a central requirement, ensuring that MNEs cannot allocate profits to shell entities in low-tax jurisdictions without demonstrating real economic activity. Companies must show that entities owning IP also perform key DEMPE functions.

For GCC structures, traditional tax-driven setups must be redesigned. GCC structures must include genuine local operations, a skilled workforce, and tangible assets to meet substance-based carve-out rules. Key provisions include: 

• Article 5.3.2: Substance-based income exclusion based on payroll and tangible assets 

• Article 5.3.3: Payroll carve-out of 5% for eligible employees in the jurisdiction 

• Article 5.3.4: Tangible asset carve-out of 5% for property, plant, equipment, and natural resources 

• Articles 6 and 7: Adjustments for M&A and non-standard corporate structures 

• Article 9.2: Transitional relief for carve-outs (10% payroll and 8% tangible assets, phased down to 5%) 

• DEMPE Guidance: Requires IP-owning entities to perform core value-creating functions to justify profit allocation 

Cost-plus, DEMPE, and IP Siting

Under BEPS 2.0 and GloBE, the cost-plus method determines arm’s-length pricing in intercompany transactions by benchmarking related-party costs with an appropriate markup. However, under the new minimum tax regime, cost-plus structures may still trigger top-up tax liabilities if ETRs fall below 15%.

GCC entities must re-evaluate cost-plus arrangements to assess their impact on jurisdictional ETRs. The OECD’s DEMPE framework adds another layer of complexity to IP siting decisions.

BEPS 2.0 requires that IP ownership be supported by substantive economic activity. This means the entity holding the IP must perform core DEMPE functions rather than acting merely as a legal owner.

Aligning IP siting with actual R&D, management, and risk-control activities is critical for GCCs to avoid disputes and minimise top-up tax exposure.

Captive, BOT, and Hybrid Models 

Multinational enterprises can structure their shared service operations in various ways to balance control, cost, and regulatory compliance. Here is a comparison of these modes in brief:

Factor	Captive Model	BOT Model	Hybrid Captive
Ownership	100% owned by the MNE	Initially provider-owned, later transferred to MNE	Shared/optional ownership, combining in-house and outsourced structures
Capital Investment	Higher upfront cost, but long-term cost efficiency	Lower initial cost, gradual investment	Flexible, as the cost is spread between outsourcing and internal ownership
Risk Management	MNE bears all risks, compliance responsibility	Provider assumes initial risks, then passes on	Risks are shared between the provider and the MNE
Implementation Speed	Longer setup	Fast initial implementation (1–2 months), transition period later	Quick to set up, adaptable to changing requirements
Control and Substance	Total operational control, strong substance demonstration	Transition to full control ensures eventual substance alignment	Partial control with flexibility requires careful alignment with the substance under GloBE

Nearshore vs Offshore After GloBE 

With BEPS 2.0 introducing a 15% global minimum tax and stricter rules, offshore structures have become less attractive. Companies are now shifting toward nearshoring or onshoring for both compliance and operational benefits. Here is how this implementation affects nearshoring and offshoring:   

• Compliance Simplicity: Nearshoring reduces exposure to substance tests and Pillar Two top-up taxes compared to complex offshore setups.  

• Lower Reputational Risk: Moving away from tax havens improves transparency and reduces regulatory scrutiny.  

• Operational Resilience: Proximity to markets enhances supply chain control, IP protection, and cost efficiency.  

• Tax Incentives: High-tax jurisdictions now offer R&D credits and investment breaks, making nearshoring financially viable.  

GIR Data and Internal Controls 

The GloBE Information Return (GIR) is a key filing under BEPS 2.0 Pillar Two. It captures data needed to assess top-up tax liabilities. From FY-24, groups must prepare GIR aligned with Transitional Safe Harbour (TSH) rules, with full submissions due by 2026.

The OECD template requires details on Effective Tax Rates (ETRs), covered taxes, and substance-based exclusions. While simplified reporting applies initially, the compliance burden remains heavy. It demands consistency across statutory accounts, CbCR data, and group reporting.

Accurate GIR reporting relies on strong internal controls for data capture and consolidation across jurisdictions. Tax authorities expect consistent ETR calculations, reconciliations, and alignment with local QDMTTs. This means tighter governance, better systems, and audit-ready documentation. With tax administrations sharing GIR data, MNEs must ensure data integrity, clear trails, and compliance monitoring to avoid risks.

Planning to transform your organisation’s workforce for the BEPS 2.0 and GloBE era? Partner with ANSR to design future-ready legal entity structures, compliance frameworks, and workforce models. Our tailored sessions help you unlock talent potential, strengthen governance, and align with global tax requirements. Schedule a meeting today and take the first step toward a compliant, future-ready business.