Poland vetoes Pillar 2 rule implementation in EU


Poland recently vetoed an agreement among EU finance ministers seeking to implement global minimum tax rules under Pillar 2 of the Organisation for Economic Cooperation and Development (OECD) and G20’s Inclusive Framework on base-erosion and profit-shifting. EU procedural rules mandate unanimous member agreement for rule implementation, meaning Poland’s objection delays Pillar 2 implementation in the EU.

Pillar 2 seeks to impose a 15% minimum tax on the earnings of certain multinational groups with revenues of 750 million euros or more. For additional information on Pillar 2, see our prior story, “Key updates on the global implementation of Pillar 2.”

Polish Secretary of State Magdalena Rzeczkowska noted that her objection largely hinges on her desire for Pillar 2 to have an explicit legal link to the other main piece of the OECD/G20’s Inclusive Framework: Pillar 1.

Pillar 1 generally seeks to sets up a framework for signatories to tax online sales for certain large multinational enterprises. Certain large businesses would no longer solely pay tax where they have a “bricks and mortar” physical presence — instead, they would also need to register and pay tax where they create value, including e-commerce sales initiated outside the jurisdiction. There is a high threshold of qualification for businesses to qualify for Pillar 1 taxation (20 billion euros in global turnover and pre-tax profit margin of more than 10% of revenue), and there also are sector exclusions for regulated financial services and extractive industries.

Rzeczkowska stated that Polish companies should not be subjected to the global minimum tax under Pillar 2 without ensuring that large digital companies are fully taxed under the profit reallocation rules under Pillar 1. However, French Finance Minister Bruno Le Maire said it is “not possible” to establish an enforceable link between the two.

The developments in the EU last week follow the historic October 2021 agreement in which nearly 140 countries — including Poland — agreed to pass domestic legislation implementing both Pillar 1 and Pillar 2. The October agreement also calls on countries to pass domestic legislation enacting Pillar 1 and Pillar 2 to be effective from the beginning of 2023 — but with so many things for legislators and businesses to do in such a short space of time, some jurisdictions may push back on such an aggressive timeline.



Cory Perry

Washington DC, Washington DC

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