Pillar 2: a fundamental reform of international taxation

On December 20, 2021, the OECD published the technical details for implementing "Pillar 2," which aims to establish a minimum taxation for multinational groups. Following this, the European Commission issued an initial proposal for a directive to adapt these rules for the European Union. The final version of the text, which may be modified in some areas, is expected to be adopted by the end of May 2022. As it currently stands, EU Member States must transpose these new rules by December 31, 2023, for application to fiscal years beginning on or after December 31, 2023.

While the OECD's framework focuses on multinational groups, the European Commission's proposed directive is more stringent and also targets national groups operating in just one state.

Which Companies Are Affected?

The groups that will be affected are those whose consolidated financial statements report annual revenue of 750 million euros or more for at least two of the previous four consecutive fiscal years, and which have at least one entity in a European Union member state.

These groups will be required to pay a supplementary tax if it is found that their results are subject to an effective taxation rate of less than 15% in any given state.

However, the results to be considered are neither the fiscal results nor the accounting results of the concerned entities, but a result specifically determined according to extremely complex rules.

The determination of the effective taxation of the group also involves the application of new rules and challenging adjustments, making this a particularly complex and demanding process.

This significant change in international taxation creates ongoing interactions between the new rules, the implementation of tax treaties, and standard tax regulations.

CMS Francis Lefebvre and RSM combine their expertise to assist you in the implementation of this reform, regardless of your industry sector.