On December 15, 2022, the EU Member States unanimously agreed to implement the minimum taxation component of the OECD’s reform of international taxation, known as Pillar 2. The instrument to implement the Pillar 2 rules at the EU level is to be achieved by means of an EU Directive. The text of the EU Pillar 2 Directive has been published by the European Commission on December 22, 2022. The EU Directive to implement Pillar 2 must be transposed into EU Member States’ national law by the end of 2023. This will result in the EU being a front-runner in applying the G20/ OECD global agreement on Pillar 2.

Under Pillar 2, the profit of large multinational and domestic groups or companies with a (consolidated) annual turnover of at least €750 million must be taxed at a minimum rate of 15%. To achieve a global minimum tax, the OECD developed a new standardized approach to calculate taxable income based on accounting standards (Global Anti-Base Erosion Rules, hereafter “GloBE rules”). If the effective tax rate in a jurisdiction based on that calculation is below 15%, such jurisdiction is considered as low taxed and additional tax will typically be due at the level of the (ultimate) shareholder(s).

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