BDO Corporate Tax News

European Union - Five EU member states elect to delay application of IIR and UTPR

The European Commission announced on 12 December 2023 that five EU member states—Estonia, Latvia, Lithuania, Malta and Slovakia—have notified the Commission that they intend to postpone the application of the income inclusion rule (IIR) and the undertaxed profits rule (UTPR) in the EU Pillar Two directive as provided in article 50 of the directive.

Based on article 50, qualifying member states can elect to delay the application of the rules for six consecutive fiscal years beginning from 31 December 2023. All five member states have informed the Commission that they do not have more than 12 ultimate parent entities of in-scope groups in their respective countries.

Despite the election, the member states still are required to implement all other relevant provisions of the directive. Notably, the election does not result in a waiver of the top-up tax liability of the group in other EU member states or third countries; it merely authorises derogating member states not to apply the IIR/UTPR for the six-year period.

Member states have until 31 December 2023 to notify the European Commission that they wish to delay the application of the IIR and UTPR so more delays are possible.


Susan Lyons
BDO Global