2021-12-22-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_10页_301kb

Pillar Two and Pillar One Implementation in the EU Under OECD BEPS 2.0 Framework

Pillar Two in the EU

• Background: The OECD BEPS 2.0 Inclusive Framework launched on July 1, 2021, with 137 jurisdictions endorsing the two-pillar solution by October 8, 2021. Pillar Two addresses base erosion and profit shifting through the Global Anti-Base Erosion (GloBE) Rules, involving entities like the Income Inclusion Rule (IIR), Undertaxed Payments Rule (UTPR), and potentially the Subject to Tax Rule (STTR).
• EU Directive: On December 22, 2021, the European Commission proposed an EU Directive to mirror the OECD Pillar Two model rules, effective for groups meeting revenue thresholds (€750 million in at least two of the last four years) or large-scale domestic groups. The directive ensures uniform application across the EU, including domestic scenarios, and interacts with existing EU Controlled Foreign Company (CFC) rules.
• Key Rules and Scope: The directive covers IIR, UTPR, and other aspects like tax neutrality and administrative provisions. Transitional rules allow an 18-month compliance period for new groups. It does not include STTR, as this is suited for bilateral treaties.
• Timeline and Effectiveness: Pillar Two rules (IIR and UTPR) effective from 2023, with implementation by EU member states; member states must align legislation by 2023.
• EU Tax Centre Comments: The directive is closely aligned with OECD rules, with potential amendments from member states. French President Macron prioritized its implementation by Spring 2022, and several EU countries (e.g., Cyprus, Spain, Ireland) are implementing national minimum top-up taxes.

Pillar One in the EU

• Background: Pillar One reforms international tax systems by re-allocating taxing rights to market jurisdictions ("Amount A"), creating a new taxing right and addressing low-margin MNEs (turnover > €20 billion, 10% profit margin). Rules for Amount A and B are expected by end-2022, under negotiation through a Multilateral Convention (MLC).
• EU Implementation: The European Commission is examining if a Directive is necessary for uniform Pillar One implementation. A proposal is expected by July 27, 2022.
• OECD Work: Pillar One rules progress slower than Pillar Two; 2022 deadlines may not be met. Includes details on Amount B and an own-resource proposal.
• Own-Resource Proposal: The EU Commission proposed reallocating 15% of Pillar One revenues to the EU budget, potentially generating €2.5-4 billion annually, subject to MLC ratification. This replaces pending discussions on a digital levy.
• Timeline: Amount A effective from 2023 if ratification thresholds are met; overall implementation and EU budget integration by late 2023.

Additional Context and Considerations

• Implementation Challenges: Member states may delay EU directive approval if international Pillar One agreement stalls, raising concerns about synchronized application.
• Future Actions: KPMG events and resources provide updates on BEPS 2.0. Broader EU budget own-resources include mechanisms for carbon border adjustments and potential future taxes.
• Key Insights: Both pillars aim for harmonized application within the EU; national minimum tax rates are emerging to align with OECD proposals, with ongoing technical negotiations set to influence effective tax rates and enforcement timelines.