Canada's Corporate Minimum Tax: Who It Hits and Who Escapes

Key takeaways

• Canada's Global Minimum Tax Act implements the OECD Pillar Two 15% global minimum tax
• Applies to Canadian multinationals with annual global revenues of at least €750 million
• Effective for fiscal years beginning on or after December 31, 2023
• Domestic minimum top-up tax (DMTT) ensures Canada taxes qualifying profits at 15% before other countries can
• Most small and medium-sized Canadian businesses are not affected

Canada's implementation of the OECD/G20 Pillar Two framework — often called the "global minimum tax" — came into effect for fiscal years beginning after December 31, 2023. The rules are complex and apply only to very large multinational groups, but their downstream effects on investment and structuring decisions are broad.

What is Pillar Two

Pillar Two is a global agreement to ensure that large multinational enterprises (MNEs) pay a minimum effective tax rate of 15% in every jurisdiction where they operate. If a jurisdiction's domestic rate is below 15%, other countries have the right to collect a "top-up tax" to bring the total to 15%. Canada's Domestic Minimum Top-up Tax (DMTT) ensures that Canada collects that top-up first, before another country's income inclusion rule or undertaxed profits rule can apply.

Who is affected

The rules apply to any MNE group with annual revenues of at least €750 million (approximately CAD 1.1 billion) in at least two of the four years preceding the fiscal year. This covers roughly 1,400 Canadian-headquartered groups. For groups below this threshold — the vast majority of Canadian businesses — nothing changes.

Practical impact for large groups

Affected groups must calculate their effective tax rate in each jurisdiction under the GloBE rules and determine whether a top-up tax is owed. This requires complex data gathering across entities in many countries. Tax planning that historically relied on low-tax jurisdictions loses its benefit if it reduces effective rates below 15%. Groups should have already begun compliance planning for their first affected fiscal year.