The Qualified Domestic Minimum Top-Up Tax: What, Why, Who, and When?

By: Atty. Jomel N. Manaig

"The 15% global minimum tax may soon arrive on Philippine shores in the form of the Qualified Domestic Minimum Top-up Tax or QDMTT. For today, we would talk about its basics: the WHAT, WHY, WHO, WHEN, and some others in between."

The Philippines may have taken its sweet time. But, alas, the gears have started moving. The 15% global minimum tax may soon arrive on Philippine shores in the form of the Qualified Domestic Minimum Top-up Tax or QDMTT. For today, we would talk about its basics: the WHAT, WHY, WHO, WHEN, and some others in between.

The WHAT. The QDMTT is part of the Global Minimum Tax initiative spearheaded by the OECD. The Global Minimum Tax aims to set a minimum tax rate of 15% to end the “race to the bottom” in corporate taxation that countries found themselves into. It also seeks to curb profit-shifting to tax havens. By adopting the QDMTT, the Philippines would impose an additional top-up tax which is the difference between the 15% minimum tax rate and the effective tax rate.

To be clear, the current plan is only for the adoption of the QDMTT. There are other facets of the Global Minimum Tax (such as the Income Inclusion Rule and the Undertaxed Profits Rule) which the Philippines has no official plans of adopting yet in the near future. As to what the Income Inclusion Rule and the Undertaxed Profits Rule are, let’s leave that for another day.

The WHY. The Global Minimum Tax is an international initiative which already has 148 countries committing to its implementation. International consensus is important for the Global Minimum Tax to work. With this as context, why should the Philippines play along and ride the bandwagon?

The rules governing the Global Minimum Tax are designed to focus on ensuring that income is taxed at a minimum of 15% regardless of where that tax is collected. If an in-scope entity is effectively taxed at a rate below 15% in the Philippines, the difference would still be collected but at a different jurisdiction. The Philippines would then be at an unfavorable position: an income was generated and taxed here at a low rate but another jurisdiction gets to impose and collect the additional top-up tax.

The WHO. Speaking of “in-scope entities,” let me start by saying that not all companies are subject to the QDMTT. Only those that are part of the largest multinational entities having global annual revenues of at least 750 Million Euros are covered. Further, the threshold should have been breached in at least two of the four immediately preceding taxable years to be considered as an in-scope entity.

Based on government data, 531 multinational entities (accounting to 44% of all multinational entities in the Philippines) are considered as in-scope entities. Though this figure may still change due to a number of factors.

The WHEN. Since our current tax laws do not provide for the imposition of the QDMTT, it would need a law to breathe life into it. However, the legislative mill grinds slow and with all the events happening in Congress, enacting a QDMTT law may take some time.

Nonetheless, the government hopes to have a law adopting the QDMTT before the end 2026 or until mid-2027 at the latest.

The SOME OTHERS IN BETWEEN. Adopting the QDMTT in the Philippines is not as simple as increasing the tax rate to reach the 15% tax rate floor. It actually raises questions about the government’s policy and how it would go about adopting the QDMTT to fit the current Philippine incentive structure.

One question is its dynamic with existing tax incentives. We have income tax incentives that result in effective tax rates below 15% (such as the Income Tax Holiday and the 5% Special Corporate Income Tax). When in-scope entities made its choice of tax incentive, the QDMTT was not yet a factor. Now, with the introduction of the QDMTT, how would it affect the enjoyment of existing incentives?

Another is the policy direction involving incentives. Since fiscal incentives are greatly affected by the international implementation of the Global Minimum Tax, should the Philippines rely more heavily on non-fiscal incentives? If we do, what non-fiscal incentives could we offer that surpasses our competitors?

There are a lot more questions that we could raise but let us keep it simple for now. In any case, we are still waiting for the draft bill which may already answer a lot of questions… or maybe even raise some more.

The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 140.