BDO Global Tax Alert

Five member states release statement on unilateral implementation of Pillar 2

16 September 2022

On 9 September 2022, the governments of France, Germany, Italy, Netherlands and Spain published a joint statement re-affirming their commitment to implementing the OECD Pillar Two rules as from 2023. The statement was made during a press conference at the informal EU Economic and Financial Affairs Council (ECOFIN) meeting in Prague.

According to the statement, the countries intend to implement the Pillar Two rules unilaterally if no EU consensus can be reached in the coming weeks. A formal ECOFIN meeting will be held on 4 October during which the Ministers of Finance are looking to reach a consensus on the draft EU Pillar Two Directive that would implement the Pillar Two Global Anti-Base Erosion rules and introduce a global 15% minimum tax for multinationals (for prior coverage, see the global tax alert issued on 16 March 2022 and the alert published on 23 December 2021). Under EU law, a directive regarding tax legislation must be unanimously agreed upon; political agreement was not reached during the 17 June ECOFIN meeting when Hungary vetoed the proposal (for prior coverage, see the global tax alert dated 20 June 2022). After the veto, the U.S. terminated its tax treaty with Hungary; the statement by the five EU member states puts some pressure on Hungary to withdraw its objections.

The manner in which the rules may be implemented is currently unclear. The member states have the option of implementing the rules unilaterally or they may initiate an “enhanced cooperation” procedure, which may be invoked when it becomes clear that the EU as a whole cannot achieve the goals of such cooperation within a reasonable period of time and where a particular proposal is blocked by one or more member states. In the field of taxation, this procedure was previously used to set up a cooperation on taxation of financial transactions.

Finally, the statement by the five EU member states contains a commitment to complete the work on Pillar One according to the designated timeline and have the multilateral convention to implement Pillar One signed by mid-2023. 

Frederik Boulogne

Mark Laeven