Search for:

Hungary drops opposition to EU’s Pillar 2 Directive

In a somewhat surprise move yesterday, it appears EU Member States actually managed to reach preliminary agreement on a minimum level of taxation for largest corporations, also known as the Pillar 2 Directive. The Committee of Permanent Representatives (or “COREPER II”) reached the required unanimous support yesterday.


As previously announced during the press conference after the ECOFIN Council meeting held on 6 December 2022, in which the Pillar 2 Directive was dropped from the agenda at the last minute, the debate continued. The continued discussions were around a “package deal” covering not only the Pillar 2 Directive, but also an €18 billion support package for Ukraine and the adoption of the Hungarian plan for its share of the Recovery and Resilience Fund.

Zbyněk Stanjura, the Finance Minister of the Czech Republic which holds the EU’s presidency until the end of the year, released the following message: “I am very pleased to announce that we agreed to adopt the directive on the Pillar 2 proposal today. Our message is clear: The largest groups of corporations, multinational or domestic, will need to pay a corporate tax that cannot be lower than 15%, globally”.

However, during the COREPER II meeting, Poland indicated it had some study reservations on the Pillar 2 Directive, which it hopes to progress before proceeding to formally adopting the deal by written procedure (for which a deadline of 14 December 2022 is being reported). The reservation from Poland is the same concern that Poland raised earlier this year, when it vetoed the Pillar 2 Directive in April, namely that Pillar 2 should be analyzed and should be implemented concurrently with Pillar 1, as part of the two-pillar proposal.

As a next step, the formal adoption for all elements of this package deal will be done through written procedure. For the Pillar 2 Directive this means that the Pillar 2 Directive has not yet been formally adopted, but will now be adopted by the EU Council in said written procedure, which (after unanimity was reached by COREPER II who prepares Council decisions) is pretty much a formality. Once that has happened, the Pillar 2 Directive will require publication in the Official Journal of the European Union to enter into force.


It is our understanding that the agreement communicated yesterday was at Coreper level. Coreper is the Council’s main preparatory body. All items to be included into the Council’s agenda (except for some agricultural matters) must first be examined by Coreper, unless the Council decides otherwise. While it is important to note that Coreper is not an EU decision-making body, and any agreement it reaches can be called into question by the Council, which alone has the power to make decisions, we expect that the adoption by the Council is a mere formality. COREPER II agreed unanimously to advise the Council to adopt the overall package by written procedure.

While it is being reported that Poland has reiterated its previous concerns, we do not expect Poland to use its veto this time. With Hungary lifting its veto, this development may mean that the EU will be the frontrunner in implementation of Pillar 2, requiring EU Member States to transpose the Pillar 2 Directive into domestic laws by the end of 2023 as originally agreed in the Inclusive Framework October 2021 Statement. It seems only a matter of time that other jurisdictions will follow. We are closely monitoring this development and will keep you informed of any updates.


Mounia Benabdallah is a partner in Baker McKenzie’s International Tax Practice Group. She joined Baker McKenzie in 2006 and has practiced in the Firm’s offices in Amsterdam, Chicago and New York. As an attorney at law she is admitted to the Netherlands Bar. Mounia is repeatedly recognized as leading advisor in ITR’s Women in Tax Leaders guide. Because of her strong US focus, Mounia is based in New York and member of the Global Reorganizations Practice Group. Mounia mainly advises US multinationals on the interplay between US international tax law, European tax law and Netherlands tax law in global restructuring projects, with a strong focus on global (OECD BEPS) and European tax policy developments.


Michał Maj has over 11 years of experience in tax advisory services with a particular focus on M&A. Michał started his career in 2007 in KPMG and has worked in PwC since 2009. Michał provides advice on the tax effective structuring and acquisition transactions. He has been involved in numerous due diligence projects (including vendor due diligence) related to the acquisitions of Polish business entities. Michał's specialization also includes tax restructuring of business entities for the realization of unique business aims. He was involved in cooperation with private equity funds, multinational corporate clients as well as Polish firms and individuals. In addition, Michał supports clients during tax audits and further proceedings, including proceedings before the court. Michał has been a licensed Polish tax advisor (license no. 11530) since 2010.


Lynn van den Berg is an associate in Baker McKenzie's Tax Practice Group in Amsterdam.

Write A Comment