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Dominik Birrer
Partner Tax, PwC Switzerland
Christa Elsaesser
Partner International Tax, PwC Switzerland
On 15 December 2022 the EU Heads of Governments formally agreed on the introduction of a global minimum taxation proposal by the EU Member States reaffirming the commitment of the European Union to the OECD’s reform of international taxation.
Following the provisional agreement of the Committee of the Permanent Representatives of the Governments of the Member States to the European Union (COREPER) earlier this week (cf. our blog post here), on 15 December 2022 the Council of the European Union formally adopted the Directive «on ensuring a global minimum level of taxation for multinational groups in the Union» («Pillar Two Directive») aimed at implementing the OECD Pillar Two Model Rules on a 15% minimum effective tax rate in the EU Member States. The Directive is being adopted as part of a package, together with decisions to financially support Ukraine and approve Hungary’s national recovery and resilience plan. The adoption, as communicated in the latest press release, forms the final step in the Council’s legislative process for these pieces of legislation.
After the EU Council had already issued a press statement on 12 December 2022 provisionally confirming the agreement on the Directive, the written procedure was - despite last-minute reservations from Poland - expected to be completed within days. Although the original deadline for adoption has been extended several times, Poland’s reservations could finally be addressed and their support for the Directive has been secured. Hence, on 15 December 2022, all delegations voted in favor of, except for Hungary that abstained, the adoption of the Directive on ensuring a global minimum level of taxation in the different Member States. With that the required unanimity has been reached.
With conclusion of the written procedure the European Union is the first block of countries that has adopted the Pillar Two minimum taxation rules. As a next step, the rules of the Directive have to be transposed into EU Member States’ national law by the end of 2023 and thus, for most groups FY24 will be the first period for which the rules will apply.
It is now expected that many countries outside the EU might follow relatively soon by either adopting changes to their legal systems or by starting public consultation processes to do so.
Based on these developments, groups in scope are well advised to (continue to) take the necessary preparatory actions in 2023 to ensure Pillar Two readiness as from FY24 onwards.
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