Search for:

Tax News and Developments December 2022

In brief

In a year-end twist, it appears EU Member States formally adopted a directive on a minimum level of taxation for largest corporations, also known as the Pillar 2 Directive.

The text of the directive adheres closely to the OECD’s Model Rules. The Directive requires EU Member States to enact domestic legislation by 31 December 2023, meaning:

  • implementation of the Income Inclusion Rule (IIR), which applies a top-up tax to parent companies that have low-taxed subsidiaries, from 31 December 2023; and
  • implementation of the backstop Undertaxed Profits Rule (UTPR) from 31 December 2024.

In line with the OECD model, the EU rules will apply to groups that have consolidated revenues of at least €750m per annum. However, the directive goes further by requiring Member States to also apply the rules to wholly domestic groups that meet the revenue threshold. The implementation timetable above is subject to a grace period for smaller Member States – those with no more than 12 in-scope groups may elect to defer implementing both the IIR and UTPR for six years (the OECD’s recent 2018 Corporate Tax Statistics publication suggests countries including Bulgaria, Hungary, Latvia, Lithuania, Slovenia and Romania will have this option).

The EU’s Committee of Permanent Representatives (or “COREPER II”) initially announced unanimous support for the directive on 12 December 2022. We discussed that preliminary agreement here.


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.

Write A Comment