Implementation of the OECD Two-Pillar solution: progresses and remaining challenges

November 30, 2023

During a conference organized by the European Tax Adviser Federation (ETAF) on Wednesday 29 November 2023 in Brussels, tax advisers, together with representatives from the OECD, the European Commission, the Spanish Presidency of the Council of the EU and the EU Tax Observatory, took stock of the progress made on the implementation of the OECD Two-Pillar solution.

In his introductory speech, Philippe Arraou, ETAF President, traced back the genesis of the OECD Two-Pillar solution and outlined the role tax advisers have to play in the implementation of the 2021 landmark agreement.

It is our responsibility to provide clear and practical advice to our clients, to help them navigating the complexities of these new rules in order to comply. And it is the responsibility of policy makers to give us the right tools to do so, with enough guidance and certainty in the legal texts”, he said.

Pillar Two has become a reality

“The global minimum tax is already a reality. It certainly will be from the 1st of January in many countries”, David Bradbury, deputy director of the OECD Centre for Tax Policy and Administration, said.  The OECD indeed estimates that 55 jurisdictions are now taking steps towards introducing a minimum 15% effective tax rate for large multinational enterprises.  

It is admittedly far from the totality of the 145 members of the OECD Inclusive Framework on BEPS which committed to do so but “we do not need 100% of the countries to implement the global minimum tax to be globally effective”, Mr Bradbury stated. The OECD estimates that by 2025, when the Under-Taxed Payments Rule (UTPR) will begin to take effect, around 90% of in-scope MNEs will be submitted to the global minimum tax.

The EU would ideally like to see more non-EU jurisdictions implementing Pillar Two, Reinhard Biebel, Head of the Unit Direct Tax Policy and Cooperation at DG TAXUD of the European Commission, said. In the EU, the transposition is going “more or less fine” and, so far, the Commission is very optimistic that EU Member States will transpose the Directive in a comprehensive way by the end of the year. Mr Biebel nevertheless recalled that some EU Member States will opt-in to the delayed application of the Income Inclusion Rule (IIR) and the UTPR, foreseen in article 50 of the Directive.

Jorge Alberto Ferreras Gutiérrez, financial counsellor at the Permanent Representation of Spain to the EU, gave an insight on the work undertaken in the Council under the Spanish Presidency, in particular on the recent statement adopted at the November Ecofin Council. The statement will bring more certainty to taxpayers, as it confirms that the OECD administrative guidance is compatible with the EU Directive and stresses the need to consistently implement the guidance throughout the EU, he explained.

Representing the tax profession in the debate, Christoph Marchgraber, partner at KPMG and member of the Pillar Two Working Group of KSW, said that most of the companies didn’t start the implementation when the OECD Model Rules or the EU Directive were published but only more recently, when their draft national transposing law was published.

Mr Marchgraber further detailed the practical challenges faced by tax advisers in the implementation of the new rules, such as the adaptation of the financial reporting process to start with the Pillar Two calculations. “The first hurdle for most companies and for us, tax advisers, is the huge amount of information and rules that you have to cover to understand what Pillar Two is all about”, he said.

Pillar One cannot fly without the US

Turning to Pillar One of the OECD agreement, which will reallocate taxing rights over multinational enterprises from their home countries to the markets where they generate profits, panelists largely recognized that the publication of the Multilateral Convention (MLC) on Amount A is a major step forward, even if some issues still need to be resolved. Mr Bradbury hoped that the MLC could be opened for signature in the first half of next year.

Speakers also addressed the elephant in the room, i.e. the current uncertainty around the signature of the United States. Mona Barake, postdoctoral researcher at the EU Tax Observatory, explained that because of the “critical mass” condition, Pillar One could not enter into force without the US. Even, without this condition, revenues would be too little as the reallocation of profits will mostly come from US MNEs, she said.

Importantly, Mr Biebel announced that the Commission will not propose an EU Directive implementing Pillar One. “There were, quite frankly, some discussions internally, but it doesn't make sense having a multilateral convention in place that has to be signed and ratified and on top of it have something like a European directive”, he said. He also clarified the link between the OECD Pillar One and the recent Business in Europe: Framework for Income Taxation (BEFIT) proposal.

Finally, the discussion also addressed the recent vote to start negotiations at the UN on a framework convention on international tax cooperation, the possible impact it could have on the work of the OECD on the Two-Pillar solution and the importance to have a common position of the EU on this.

Notes to editors:

Our event can be watched again online here:

For media enquiries, please contact: Marion Fontana, EU Policy Officer, [email protected], Phone: +32 2 2350 105 | Mobile: +32 471 78 90 64

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