Pillar Two Spotlight: UTPR considerations and key actions

As in-scope Pillar Two Groups have navigated the first compliance cycle, with attention moving to the second filing period, one of the most significant areas of uncertainty for multinational groups remains the Undertaxed Profit Rule (‘UTPR’), and the associated compliance obligations

As a brief reminder, UTPR operates as the backstop to the Pillar Two regime in situations where low-taxed income is not collected under Qualified Domestic Top-up Tax (‘QDTT’) or through the Income Inclusion Rule (‘IIR’). Top-up tax to be collected under UTPR is allocated to jurisdictions that implemented a qualified UTPR by using an allocation key based on employee headcount and the value of tangible assets. 

Side-by-Side Package vs. UTPR Safe Harbour 

A key area of potential misunderstanding is the interaction between the existing transitional UTPR Safe Harbour and the Side-by-Side Safe Harbour introduced as part of the OECD’s 2026 safe harbour package.

While much of the recent focus has understandably been on the OECD’s new Side-by-Side measures, particularly for multinational groups with a US Ultimate Parent Entity (‘UPE’), groups should not overlook their potential exposure to the UTPR during the period before the new measures become effective.

The Side-by-Side Safe Harbour applies only to fiscal years commencing on or after 1 January 2026. Accordingly, groups should separately assess their position for fiscal years commencing before that date, including whether the existing transitional UTPR Safe Harbour is available and, where it is not, whether any UTPR exposure could arise.

Some of the key differences between these reliefs are in relation to the effective date and the scope of the relief. These can be briefly summarised below.

• Transitional UTPR Safe Harbour: Deems the UTPR top-up tax to be zero for the UPE jurisdiction during the transitional period, where the eligibility criteria are met. The relief applies to qualifying fiscal years not exceeding 53 weeks, commencing on or before 31 December 2025 and ending before 04 January 2027.
• Side-by-Side Safe Harbour: Deems UTPR and IIR to be zero across the group, only if the UPE is located in a jurisdiction with a Qualified Side-by-Side regime. The relief is only available for fiscal years commencing on or after 1 January 2026 i.e., not available for fiscal years that commenced before this date.

UTPR registration, filing and financial reporting obligations

For fiscal years falling within the period before the Side-by-Side Safe Harbour becomes effective, groups should assess whether the transitional UTPR Safe Harbour is available and, where it is not, whether UTPR exposure arises across the Group. This assessment is important as any UTPR exposure may give rise to registration, filing and financial statement disclosure obligations.

Registration obligation

Irish constituent entities subject to UTPR are required to register for UTPR with the Irish Revenue Commissioners (‘Revenue’) within 12 months of the end of the relevant fiscal year. For example, for a 31 December 2025 year-end, the registration deadline is 31 December 2026.

Where appropriate, constituent entities may also elect to form a UTPR group, with one member appointed as the UTPR group filer to meet the relevant Irish filing obligations on behalf of the group.

Filing obligation

The relevant UTPR return, self-assessment and payment of any UTPR liability must generally be completed within 15 months of the end of the relevant fiscal year. This deadline is extended to 18 months for an entity’s first fiscal year in scope of the Pillar Two rules. For example, where the standard 15-month deadline applies to a 31 December 2025 year-end, the filing and payment deadline would be 31 March 2027.

Financial statement disclosure obligations

Groups should assess the financial reporting implications of any potential UTPR exposure at each reporting date, both at the consolidated group level and for the relevant local entities. Where a UTPR liability arises, consideration should be given to the appropriate recognition, measurement, presentation and disclosure of the resulting UTPR top-up tax expense and liability in the relevant financial statements.

Pillar Two UTPR: Key actions for multinational groups

Our key takeaways can be summarised as follows:

• Assess eligibility for the transitional UTPR safe harbour.
• Assess UTPR exposure across the entire group.
• Assess the impact on the tax disclosures in both the group consolidated accounts and local statutory accounts.
• Identify and meet the relevant UTPR registration, filing and payment obligations.

Contact us

Should you require support with your UTPR assessment, financial reporting or Pillar Two compliance obligations, please contact the RSM Pillar Two team or your usual RSM contact.