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Kozi Checks & Balances TaxTactics News

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August 09.2025

2 Minutes Read

How Will the 2025 Undertaxed Payments Rule Increase Compliance Complexity for MNEs?

Professional woman analyzing Undertaxed Payments Rule compliance complexity.

The New Era of Global Taxation: Understanding the UTPR

The Undertaxed Payments Rule (UTPR), set to roll out in 2025, represents a pivotal shift in how multinational enterprises (MNEs) navigate tax obligations globally. Aimed at enforcing a minimum effective tax rate of 15%, the UTPR operates under the OECD's Pillar Two framework. This regulation seeks to curtail tax avoidance strategies that have become significantly common in the realm of international business, ensuring that large corporations contribute their fair share no matter where they operate.

Compliance Complexity on the Rise

As MNEs prepare for the implementation of the UTPR, the anticipated compliance complexity is significant. Each participating country will have its interpretation and adjustments to the rule, making it essential for corporations to understand local variations. The challenge will not only revolve around understanding tax rates but also in adjusting reporting systems to comply with different requirements across jurisdictions.

The Importance of Data Collection and Reporting

Detailed data collection will be at the forefront of UTPR compliance. MNEs must be prepared to calculate and report effective tax rates and detailed financial data for each subsidiary in each country where they operate. This means that companies will need to invest in robust reporting systems capable of handling intricate data sets and iterative calculations, raising costs and requiring new skills in the workforce.

Avoiding Double Taxation: A Growing Risk

Another facet of the UTPR that adds to compliance complexity is the heightened risk of double taxation. With multiple jurisdictions potentially claiming taxes on the same profits, MNEs face the daunting task of coordinating between various tax authorities to prevent being taxed twice for the same income. This calls for strategic planning and negotiation capabilities, urging companies to reassess their operational and financial structures.

What This Means for the Future of International Business

The implementation of the UTPR represents a significant development in global taxation. As MNEs brace for more complex tax compliance and reporting requirements, organizations need to prioritize developing flexible strategies and sophisticated systems capable of adapting to evolving international tax landscapes. This transitional period compels industries to rethink not only their tax strategies but also the broader implications of maintaining transparency and accountability in global operations.

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How Will the 2025 Undertaxed Payments Rule Increase Compliance Complexity for MNEs?

The New Era of Global Taxation: Understanding the UTPR

Compliance Complexity on the Rise

The Importance of Data Collection and Reporting

Avoiding Double Taxation: A Growing Risk

What This Means for the Future of International Business

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