Pillar One, Pillar Two entered into force on 01, January 2024

New EU rules came into effect on 01, January 2024 introducing a minimum rate of effective taxation of 15% for multinational companies active in EU Member States.

Pillar One

Pillar One established rules for market jurisdictions on “Amount A”.

These rules are not related to the physical presence and will be determined based on a formal approach.

These rules will only apply to MNE groups with both a global profit of over EUR 20 billion and a pre-tax profit margin above 10%.

Pillar Two

Pillar Two established rules of a global minimum corporate income tax at an effective rate of 15%, calculated on a jurisdiction-per-jurisdiction basis. 

These rules will apply to MNEs that meet the EUR 750 million threshold as determined under Country-by-Country rules, but a lower threshold may be applied at their discretion.

Pillar Two consists of a mix of measures giving taxing rights to the jurisdiction of the group’s ultimate parent and the jurisdictions of entities making intra-group payments to low-taxed group companies or jurisdictions.

“By lowering the incentive for businesses to shift profits to low-tax jurisdictions, Pillar 2 curbs the so-called "race to the bottom" — the battle between countries to lower their corporate income tax rates to attract investment. It is already delivering results, with several zero-tax jurisdictions around the world having announced the introduction of a corporate income tax for the companies in scope" - https://lnkd.in/djVGTUpc

These changes will reset the international tax climate, as the trend towards the global transfer of business to low-tax jurisdictions will stop.