International deal teams can no longer treat Pillar Two as a specialist tax issue to be addressed late in the process. The regime now operates within a 147-jurisdiction Inclusive Framework, and implementation has continued to broaden across both established and developing markets. For acquisitive groups, sponsors, and multinational investors, this means that transaction pricing, diligence, signing protections, and post-closing integration can all be materially affected by global minimum tax rules.

The practical challenge has become sharper after the OECD’s package released on 5 January 2026, which introduced a permanent simplified ETR safe harbour, an extension of the transitional CbCR safe harbour, a substance-based tax incentive safe harbour, and a “side-by-side system.” While these changes altered assumptions for 2026 onward, they did not eliminate exposure for 2024 and 2025. In practice, one of the most common Pillar Two pitfalls is to model a deal on future simplifications while overlooking immediate filing, top-up tax, and documentation risk.

Do not confuse the 2026 policy shift with relief for 2024 and 2025

The January 2026 OECD package changed the analytical landscape for US-linked and other international groups, but it did not rewrite the exposure profile for earlier years. Grant Thornton expressly noted that the package does not exempt US multinational groups from the full Pillar Two rules for 2024 and 2025, and that 2024 filings may be due as early as June 2026. For deal teams, this creates a clear temporal split: pre-2026 years still require full diligence and protection analysis even if a different framework may apply from 2026 onward.

A practical pitfall in transactions is to assume that a new OECD direction makes near-term diligence less urgent. That assumption is unsafe. Acquisition models should distinguish carefully between historic and current exposures, interim reporting obligations, and the possible effect of changing safe harbours from 2026. A model that compresses all years into one policy assumption may understate pre-closing liabilities or overstate post-closing efficiencies.

The appropriate response is to build a year-by-year Pillar Two workstream into the deal timetable. International deal teams should ask at the outset which years are already exposed, when the first filing obligations arise, and whether the target has prepared for those deadlines. This is especially important where buyers are considering locked-box pricing, deferred consideration, or indemnity thresholds that may not capture later-emerging top-up tax costs.

Test scope and threshold issues before signing, not after closing

One of the most important Pillar Two pitfalls is to treat the €750 million revenue threshold as a static status test for the buyer alone. PwC has highlighted that a transaction can push a group over that threshold, materially increasing compliance burdens and data requirements. In addition, recent M&A analysis notes that acquired revenues prior to the acquisition or merger are combined with the acquiring group for threshold testing, meaning an apparently out-of-scope group can become exposed because of the transaction itself.

This issue is not merely theoretical. Acquisition activity may also trigger the loss of concessions or prior simplifications, bringing a group into scope more abruptly than management expected. The result can be a material disconnect between board-level deal economics and the actual post-closing compliance perimeter. For private capital and sponsor-backed structures, the risk is particularly acute where platform add-ons, continuation vehicles, and co-investments are analysed separately rather than at the relevant Pillar Two group level.

The practical step is to make threshold testing a mandatory pre-signing workstream. That testing should include historic group revenue, target revenue, pre-acquisition combination effects, and any consequences for safe harbour availability or concessions. It is not enough to ask whether the buyer is in scope today; the correct question is whether the transaction changes scope, timing, or the availability of simplifications across the enlarged group.

Keep jurisdiction maps live throughout the deal process

International transactions often fail on Pillar Two not because teams ignore the rules, but because they rely on outdated implementation maps. Deloitte recommends reviewing whether each relevant jurisdiction has implemented the IIR, QDMTT, or UTPR, and when. That remains essential because identical target profiles can produce materially different tax outcomes depending on local enactment dates and qualified status.

The jurisdictional spread has continued to widen. OECD reporting confirmed implementation across additional markets through 2025, including developing countries such as Brazil, Indonesia, Kenya, Malaysia, South Africa, Thailand, Türkiye, Viet Nam, and Zimbabwe. OECD materials also indicated that other jurisdictions expected legislation effective from 2025 included Hong Kong, Isle of Man, Iceland, Jersey, New Zealand, Singapore, and Thailand, while the UAE implemented a Domestic Minimum Top-up Tax for relevant financial years starting on or after 1 January 2025.

Deal teams should therefore avoid preparing a jurisdiction matrix at LOI stage and then leaving it untouched until closing. The better approach is a live implementation map, refreshed through signing and pre-close confirmatory diligence, with separate attention to whether local rules have relevant qualified status. OECD materials indicate that details are maintained in a central record of legislation with transitional qualified status, and that record was updated repeatedly in 2025. In practice, enactment alone is not enough; qualified status can materially affect who pays the top-up tax and where.

Safe harbours are a diligence issue, not a pricing assumption

Safe harbours may reduce compliance or computational burdens, but they should never be assumed without testing. Deloitte specifically points to the need to assess whether buyer and target are in the temporary safe harbour, while PwC has warned that many multinational groups may not qualify in practice for transitional safe harbours. A frequent deal error is to bake safe-harbour relief into valuation and synergy cases before the factual conditions have been verified.

This risk has become more nuanced after the OECD’s January 2026 package. Deal teams must now distinguish among the extended transitional CbCR safe harbour, the permanent simplified ETR safe harbour, and the newer substance-based tax incentive safe harbour. They should also keep separate the existing substance-based income exclusion mechanics, whose transitional percentages decline over time, from the new 2026 safe harbour for substance-based incentives. These concepts are related, but they are not interchangeable.

Timing matters as well. PwC has explained that the transitional CbCR safe harbour remains time-limited, applying for fiscal years beginning on or before 31 December 2026, but not including a fiscal year ending after 30 June 2028. That means acquisition models should not hard-code temporary simplifications into long-range forecasts. The disciplined approach is to model safe harbour outcomes as contingent scenarios, with explicit expiry assumptions and sensitivity testing.

Data rooms are rarely Pillar Two ready

Another major Pillar Two pitfall is to equate a well-populated data room with operational readiness for GloBE calculations. Deloitte has observed that where a seller is not yet in scope or benefits from temporary safe harbour, detailed Pillar Two calculations may simply not exist, and the first GloBE Information Return may not yet have been filed. Buyers therefore cannot assume that the absence of a file means the absence of risk.

Recent survey evidence reinforces the point. PwC’s Global Reframing Tax Survey 2025 found that 91% of large organisations expect to be impacted by Pillar Two, and EY reported that 83% of respondents would need moderate to significant adjustments to source data to produce tax-ready information. In transaction practice, this means that “data available” and “data usable for Pillar Two” are different concepts. Missing chart-of-accounts mapping, inconsistent GAAP conversion data, and incomplete deferred tax detail can all undermine diligence conclusions.

The practical response is to expand diligence requests beyond standard tax packs. Buyers should request available GloBE workpapers, jurisdictional ETR analyses, deferred tax inventories, CbCR support files, chart-of-accounts mappings, and explanations of any estimation methods currently used. Where full computations do not exist, deal teams should agree a documented estimation methodology and assess whether bespoke indemnities or purchase price adjustments are needed to address residual uncertainty.

Accounting and deferred tax issues can move the economics of the deal

Pillar Two is built on financial reporting data under IFRS or other applicable GAAP, which makes accounting complexity a frontline transaction issue. PwC has noted the difficulties created by local-versus-parent GAAP differences, topside entries, and the reversal of intercompany eliminations. A tax diligence process focused only on statutory tax returns may therefore miss the adjustments that actually determine jurisdictional effective tax rates under GloBE.

This is why governance must be broader than the tax department. PwC’s Jurriaan Weerman captured the point directly: “Finance leaders must be at the table from day one.” In a deal setting, that means controllership, reporting teams, and transaction model owners need to participate early enough to test accounting policies, purchase accounting assumptions, and the availability of data needed to support Pillar Two calculations.

Deferred tax deserves specific attention. Deloitte has warned that certain deferred tax assets that are acceptable locally may not qualify as “good DTAs” for Pillar Two purposes, creating unexpected top-up tax exposure. For buyers, that makes deferred tax inventory, valuation allowance assumptions, and purchase accounting mechanics critical diligence items. If these issues are ignored, a transaction may look tax-efficient in local accounts while producing an adverse GloBE outcome after closing.

Carve-outs, minority investments, and JVs need bespoke legal drafting

Legal drafting has not yet converged on a settled market standard for Pillar Two. Deloitte has stated that market practice is still evolving and that there are no standard provisions yet for deal documents. That is particularly important for acquisitions involving locked-box structures, carve-outs, earn-outs, and completion accounts, where the treatment of accruals and top-up tax liabilities can alter value transfer between seller and buyer.

Carve-outs raise a distinct retained-entity risk. Deloitte notes that buyers must consider possible top-up tax arising from the seller group’s retained entities in the same jurisdiction. Because Pillar Two can operate at a jurisdictional level, retained activities outside the acquired perimeter may distort expected ETRs or safe harbour positions after closing. Where diligence is constrained, especially in carve-outs, bespoke indemnity clauses may be required to protect the buyer from liabilities tied to seller-retained entities.

Minority and joint venture investments are not exempt. Deloitte has recommended that shareholder agreements address potential Pillar Two charges allocated to the target, and PwC has warned that venture agreements and M&A documents may need revision so partner actions do not unexpectedly bring an investment into scope or depress returns. For sponsors and private capital teams, this is a direct return-protection issue: Pillar Two can reduce shareholder returns even where the investment is not obviously in scope at entry.

Integration planning must include reporting architecture and controls

The post-closing phase is often where Pillar Two failures become visible. The OECD released GloBE Information Return status-message XML Schema and validation rules on 30 July 2025, confirming that data production capability is now part of practical compliance readiness. Diligence should therefore test not only tax positions, but also whether the target can produce validated data suitable for GIR reporting and exchange.

This matters because the GIR is designed to work through coordinated filing and exchange mechanisms that allow multinational groups to report GloBE calculations on a single return, with relevant information then made available to implementing jurisdictions. In acquisitions, that architecture raises integration stakes considerably. An acquired business may need to be folded rapidly into central data governance, reporting controls, and responsibility matrices even if local finance teams have never prepared Pillar Two data before.

The practical solution is to build a transaction checklist before the next deal, not after signing. That checklist should connect diligence, tax modeling, finance systems, TSA design, legal protections, and post-merger integration milestones. EY recommends establishing a cross-functional team including tax, finance, IT, and other relevant departments; in transactions, that team should also include corporate development, legal, treasury, valuation, and integration leads. Put simply, do not treat Pillar Two as a tax workstream only.

Pillar Two pitfalls in international M&A are now sufficiently widespread that they should be treated as a standard part of transaction execution rather than an exceptional technical overlay. OECD estimates of very large annual revenue effects, together with implementation patterns suggesting that around 90% of global MNEs were expected to be covered by end-2025, make clear why tax authorities are unlikely to be lenient where acquisition-related compliance or payment failures emerge.

For deal teams, the practical agenda is straightforward even if the technical analysis is not: separate 2024 and 2025 exposures from 2026 assumptions, test threshold and jurisdiction issues early, verify safe harbour eligibility, demand usable data, involve finance leaders from day one, and use bespoke legal protections where diligence is constrained. Those steps will not eliminate all uncertainty, but they will materially improve pricing discipline, execution readiness, and post-closing control over Pillar Two risk.