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Pillar Two and a Taiwan Subsidiary: The Parent Runs the 15% Test
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Pillar Two and a Taiwan Subsidiary: The Parent Runs the 15% Test

7 min read

A common reading of Pillar Two runs like this: Taiwan has not legislated the global minimum tax, so the Taiwan subsidiary can ignore it. For a Vietnamese-parented group, that gets the mechanics backwards. The parent does the arithmetic.

Vietnam's National Assembly adopted Resolution 107/2023/QH15 on November 29, 2023. Its income inclusion rule (IIR) in Article 5 requires a Vietnamese ultimate parent, intermediate parent or partially-owned parent that directly or indirectly holds a low-taxed constituent entity abroad to declare and pay tax at a 15% minimum rate. A Taiwan subsidiary can be that entity. Its figures then feed into the Vietnamese parent's tax bill.

Where Taiwan stands in October 2026

Taiwan had adopted no IIR, undertaxed profits rule (UTPR) or qualified domestic minimum top-up tax (QDMTT) in the official Ministry of Finance (MOF) and Taxation Administration texts checked up to October 7, 2026. The most recent policy statement is an August 30, 2023 Taxation Administration release. It notes that Taiwan is not a member of the OECD/G20 Inclusive Framework on BEPS. Then it sets out three stages: in the short term, study an industry proposal to raise the corporate alternative minimum tax (AMT) rate to 15%; in the medium term, plan whether to introduce a QDMTT that meets international standards; in the long term, assess the global minimum tax itself. No timetable was set.

Next came a draft. On August 28, 2024, MOF pre-announced an AMT rate of 15% from tax year 2025 for Taiwan entities of multinational groups that meet the global minimum tax threshold. That threshold is, in principle, consolidated revenue of at least EUR 750 million in any two of the four preceding fiscal years. Every other enterprise would stay at 12%. MOF said the extra tax would also count in the numerator of those entities' effective tax rate under the global minimum tax, cutting the risk of paying top-up tax to other countries.

Officially, the draft remains a draft. A Central Region tax office release of May 8, 2026 computes tax year 2026 basic tax with the "current rate of 12%", and no Executive Yuan order adopting the draft was found. Watch the statute. Article 8 of the Income Basic Tax Act lets the Executive Yuan set the rate between 12% and 15%, so moving to 15% needs no amendment.

How a 20% rate ends up below 15%

Corporate taxable income above NT$120,000 is taxed at 20% of the whole amount (Income Tax Act, Article 5, paragraph 5). So why would the Taiwan figure fall short of 15%? Tax credits. The R&D credit in Article 10 of the Industrial Innovation Statute lets a company deduct up to 15% of qualifying spending from that year's corporate income tax, capped at 30% of the tax. Use the full cap and the tax falls to about 14% of taxable income (20% times 70%, simple arithmetic).

Taiwan's AMT puts a floor under that. When tax after investment credits is below the basic tax, the company pays the difference, and investment credits cannot reduce it (Income Basic Tax Act, Article 4). The floor sits at 12%. Pillar Two recomputes the effective tax rate from accounting profit and tax expense, so the result will not match this shortcut. Credits that shrink Taiwan tax still push the rate down.

One Taiwan incentive already works the other way. The 25% credit for supply-chain leaders in Article 10-2 requires an effective tax rate, as that article defines it, of at least 12% for tax year 2023 and 15% from tax year 2025. The Taxation Administration said the condition took account of Pillar Two (release of June 18, 2024). The credits and their caps are covered in Taiwan R&D and Equipment Tax Credits for Foreign-Owned Subsidiaries.

The parent computes one rate for all of Taiwan

Pillar Two works country by country. Under Article 5.1 of the OECD GloBE Model Rules, the effective tax rate for a jurisdiction is the adjusted covered taxes of every constituent entity there, divided by the jurisdiction's net GloBE income. Article 5.2 takes the gap below 15% as the top-up tax percentage and applies it to excess profit. Excess profit is net GloBE income minus a substance-based exclusion built from payroll and tangible assets (Article 5.3). A Taiwan rate of 13% would mean a two-point top-up percentage (an invented figure). Two Taiwan companies in the group are added together.

A QDMTT would change the outcome. Article 5.2 deducts tax payable under a jurisdiction's qualified domestic minimum top-up tax from the top-up computed for that jurisdiction. MOF gave that reason in 2023 for considering one: to avoid other countries collecting tax that Taiwan had reduced or exempted.

Vietnamese parents: an IIR since fiscal year 2024

Resolution 107/2023/QH15 covers constituent entities of groups whose ultimate parent's consolidated financial statements show revenue of at least EUR 750 million in at least two of the four preceding fiscal years, with listed exceptions (Article 2). Article 4 adds a QDMTT for group entities operating in Vietnam. Both rules use a 15% minimum rate. The Resolution took effect on January 1, 2024 and applies from fiscal year 2024 (Article 8); it has no UTPR article. The government issued implementing Decree 236/2025/NĐ-CP on August 29, 2025. According to the government's announcement, it took effect on October 15, 2025 and applies from fiscal year 2024. A Vietnamese tax adviser can confirm how the decree's filing steps apply to a particular group.

US parents: the side-by-side safe harbour from 2026

US groups start from a different place. In a G7 statement of June 28, 2025, Treasury described a side-by-side system that would exempt US-parented groups from the IIR and UTPR "in recognition of the existing U.S. minimum tax rules to which they are subject." The Inclusive Framework approved the Side-by-Side Package on January 5, 2026. A group whose ultimate parent sits in a qualifying jurisdiction can elect the safe harbour, and it is then not subject to the IIR or UTPR (paragraph 15). The OECD Central Record lists the United States as a qualified side-by-side regime, for fiscal years beginning on or after January 1, 2026.

Two limits remain. Every group, including one using the safe harbour, stays subject to QDMTTs in the jurisdictions where it operates (paragraph 19), and fiscal years that began before January 1, 2026 are unaffected (paragraph 28). Set beside Taiwan's current position, with no QDMTT in the official texts checked, the package suggests that an electing US group's Taiwan profits face no IIR, no UTPR and no Taiwan QDMTT from fiscal year 2026 onward. That is an inference from the rules, not an official statement. A US tax adviser can confirm how US minimum tax rules treat the Taiwan income.

What the parent will ask the Taiwan finance team for

Requests start from the group reporting package. Article 3.1 of the Model Rules builds GloBE income from the net income determined for the entity in preparing the ultimate parent's consolidated financial statements. Article 4.1 starts covered taxes from the current tax expense accrued in those accounts. Even the year follows the parent: a "Fiscal Year" is the period for which the ultimate parent prepares consolidated statements (Article 10.1). Taiwan's own accounting year runs January to December unless the tax office approves a change (Income Tax Act, Article 23).

In practice that points to requests for:

  • net income as reported to the group, on the group's year;
  • corporate income tax and AMT expense, deferred taxes, and credits claimed;
  • payroll costs and the carrying value of tangible assets in Taiwan, for the substance-based exclusion.

The information return described in Article 8.1 must contain what is needed to compute the effective tax rate for each jurisdiction and the top-up tax of each constituent entity, filed no later than 15 months after the year-end under the Model Rules. Taiwan's own May filing calendar is set out in A Taiwan Subsidiary's Tax Year.

To check how Taiwan's statutes and MOF releases feed into a group computation, Hovering International Law Firm can be reached at wei@hoveringlaw.com.tw; include the group's year-end and its Taiwan entities.

One Taiwan lever can move without a statute change: the AMT rate. If the Executive Yuan sets 15% for in-scope groups, the extra Taiwan tax enters the numerator the parent uses, as MOF itself explained.

Official sources

Checked October 7, 2026.

Frequently Asked Questions

Taiwan has no global minimum tax law. Does our Taiwan subsidiary pay any top-up tax?
Not in Taiwan. In the official Taiwan texts checked up to October 7, 2026, Taiwan had adopted no IIR, UTPR or QDMTT. Under an income inclusion rule the parent pays: Vietnam's Resolution 107/2023/QH15, for example, requires a Vietnamese ultimate parent that holds low-taxed constituent entities abroad to declare and pay top-up tax at a 15% minimum rate from fiscal year 2024.
Has Taiwan raised its corporate alternative minimum tax to 15%?
Not in any official text found. On August 28, 2024 the Ministry of Finance pre-announced a draft applying 15% from tax year 2025 to Taiwan entities of groups with consolidated revenue of at least EUR 750 million in any two of the four preceding fiscal years. A tax office release of May 8, 2026 still describes the rate in force as 12%, and no Executive Yuan order adopting the draft was found. The Executive Yuan can set any rate from 12% to 15% without amending the Income Basic Tax Act.
Does the side-by-side safe harbour mean a US-parented group can ignore Taiwan's numbers?
For fiscal years beginning on or after January 1, 2026, a group whose ultimate parent is in the United States can elect the safe harbour and is then not subject to the IIR or UTPR. It remains subject to QDMTTs wherever they apply, and the safe harbour does not reach earlier fiscal years. How US minimum tax rules treat the Taiwan income is a question for a US tax adviser.

This article provides general information and is not legal advice on any individual matter.

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