Title What is the Two-Pillar Approach?
Description

Pillar One aims to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, which are the winners of globalization. It seeks to tax the largest MNEs (those with at least 20 billion euros in revenue) and the most profitable (profit before tax of 100) where 25% of the residual profit above the 10% is re-allocated to market jurisdictions.


Pillar Two puts a floor on tax competition on corporate income tax through the introduction of a global minimum corporate tax at a rate of 15% that countries can use to protect their tax bases. It seeks to strengthen tax avoidance and harmful tax practices.




























KEY ELEMENTS OF THE TWO-PILLAR SOLUTION

Pillar One

Pillar Two

Taxing rights on 25% of the residual profit of the largest and most profitable MNEs. This  would be re-allocated to the jurisdictions where the customers and users of those MNEs are located

A global minimum tax of 15% on all MNEs with annual revenue over 750 million euros

Tax certainty through mandatory and binding dispute resolution, with an elective regime to accommodate certain low-capacity countries

Requirement for all jurisdictions that apply a nominal corporate income tax rate below 9% to interest, royalties, and a defined set of other payments to implement the “Subject to Tax Rule” into their bilateral treaties with developing Inclusive Framework members when requested to, so that their tax treaties cannot be abused.

Removal and standstill of Digital Services Taxes and other relevant, similar measures upon joining the Two Pillar approach

The establishment of a simplified and streamlined approach to the application of the arm’s length principle in specific circumstances, with a particular focus on the needs of low-capacity countries.

Carve-out to accommodate tax incentives for substantial business activities
Category OECD/G20 BEPS Project ( Inclusive Framework )