Update on conceptual agreement on BEPS 2.0 project



October Statement


As mentioned in past posts, the OECD created Two Pillar in order to address tax challenges arising from the digitalization of the economy. 

In October 2021, the OECD published a statement indicating that the Inclusive Framework has agreed on a two-pillar solution. What does this mean?  



Pillar 1

  1. The scope of Amount A is restated without change as multinational entities (MNEs) with a global turnover above €20 billion and profitability above 10%. 
  2. Amount A will allocate 25% of “residual profits”, which is defined as profit in excess of 10% of revenue, to market jurisdictions with nexus using a revenue-based allocation key.
  3. A mandatory and binding dispute resolution mechanism will be available for all issues related to Amount A. 
  4. The removal of all Digital Services Taxes and other relevant similar measures with respect to all companies will be required by the Multilateral Convention (MLC) through which Amount A is to be implemented. 
  5. The October Statement reiterates that the MLC through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2023.


Pillar 2

  1. It is restated that Inclusive Framework members are not required to adopt the Global Anti-Base Erosion (GloBE) rules. 
  2. The design of Pillar Two is restated, including the GloBE rules, consisting of the Income Inclusion Rule (IIR) and the UTPR, and the Subject to Tax Rule (STTR). 
  3. In respect of existing distribution tax systems, there will be no top-up tax liability if earnings are distributed within four years and taxed at or above the minimum level.
  4. The minimum tax rate for purposes of the IIR and UTPR will be 15%.
  5. The substance-based carve out is modified from the July Statement, with a transition period of 10 years during which the amount excluded will be 8% of the carrying value of tangible assets and 10% of payroll.
  6. de minimis exclusion is provided for those jurisdictions where the MNE has revenues of less than €10 million and profits of less than €1 million.
  7. The nominal tax rate used for the application of the STTR will be 9%.
  8. It is restated that Pillar Two will apply a minimum rate on a jurisdictional basis. 
  9. The October Statement reiterates that Pillar Two generally should be brought into law in 2022, to be effective in 2023. However, the entry into effect of the UTPR has been deferred to 2024