Key jurisdictions delay implementation of Pillar 2


Key European countries confronted delays in implementing key provisions of the Organisation for Economic Cooperation and Development’s (OECD) Pillar 2 global minimum tax. The UK announced they would be delaying implementation until 2024, while objections from member countries in the EU have put broader European implementation on hold. With implementation in the U.S. currently stalled, it appears increasingly unlikely that there will be any widespread implementation of key provisions due by 2023 under the OECD’s original timeline.

Over 130 jurisdictions agreed in October 2021 to the OECD’s two-pillar approach for overhauling international tax rules to combat perceived shortfalls of the current system. Since then, the OECD has released numerous consultation drafts including model rules and commentaries providing a framework for local country implementation of the measures while simultaneously encouraging jurisdictions to move forward with the implementation on an ambitious timeline.

Pillar 1 of the OECD’s plan deals with the allocation of taxing rights and covers a more limited number of taxpayers—generally only companies with a global turnover above 20 billion euros and a profit margin above 10%.

Pillar 2, on the other hand, generally seeks to impose a 15% minimum tax on the earnings of most multinational groups with revenues of at least 750 million euros. By deploying two interlocking rules under Pillar 2—the income inclusion rule (IIR) and the undertaxed payment rule (UTPR)—income taxed at less than 15% would be targeted for additional taxation. Shortly after the October agreement, the OECD released model rules providing guidance on the scope of the rules, the application of the IIR and UTPR, and numerous other issues. Per the model rules, the OECD hoped the implementation of these rules can be accomplished by 2023 for the IIR, and 2024 for the UTPR. This is so far proving overly optimistic.

The UK government announced on June 14 that the implementation of Pillar 2 legislation will be delayed until calendar year 2024. This delay is in response to comments received during the UK’s public consultation on the implementation of Pillar 2. Generally, due to the complexity of the Pillar 2 rules, stakeholders were concerned that there was not sufficient lead time for implementation. For more details regarding the UK delay, see our previous story, “UK delays implementation of Pillar 2 tax rules.”

The European Union is seeing delays as week. On June 17, the Council of the European Union (“The Council”) held an Economic and Financial Affairs Council (ECOFIN) meeting to address the draft European Directive on Pillar 2. In advance of the meeting, The Council published new compromise text stating that once the European Directive is adopted, the provisions should apply for fiscal years starting on or after Dec. 31, 2023. However, Hungary objected to the adoption at the meeting, effectively stalling the measure in the EU, as all member states of The Council must approve the directive for the text to be adopted. These developments follow earlier objections from Poland that had delayed the process, but now appear resolved.

Applicable multinational enterprises should monitor additional OECD Pillar 2 communication and developments as they continue to evolve. Further developments on implementation are expected in the coming months.




Cory Perry

Washington DC, Washington DC

  • Manufacturing
  • Technology and telecommunications
  • Private equity
Service Experience
  • Tax
Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics