EU agreement reached for Pillar 2 Directive and commitment to Pillar 1 rules reaffirmed

Almost a year after the EU Commission presented a proposal for a directive to implement the Pillar 2 rules, the EU Member States on 12 December 2022 reached the necessary unanimous agreement to implement the Pillar 2 Directive.  The EU Member States also reaffirmed their commitment to the implementation of Pillar 1 rules (the drafting of which by the OECD is ongoing).  This brings much needed renewed momentum to the OECD two pillar project generally.

Progress at EU level has been deadlocked for much of 2022, primarily because of strong objection from Hungary to the proposed directive.  The announcement of the EU consensus comes days after the December ECOFIN meeting at which the two pillar matters were absent from the agenda, which did not bode well for progress before year end. 

The outlook for the international tax landscape for 2023 is now taking a very different shape.  The Pillar 2 directive must be implemented into EU Member States' national law by 31 December 2023 at the latest.  That EU progress, together with continued developments in the UK, and support for the two pillar rules in Australia, Korea, Japan and Switzerland means that it should be expected that 2023 should see developments and progress on implementation in many more countries, bearing in mind that some 140 countries signed up in October 2021 to a political agreement on the two pillar rules.

EU Member States also confirmed their continued support for the ongoing OECD work on Pillar 1, including the multilateral convention, and their determination to have both Pillar 1 and Pillar 2 implemented. 

For more information on this please contact Philip McQueston, Emma Hartnett or any member of A&L Goodbody's Tax team.

Date published: 15 December 2022