Tax – A Shake-Up Looms

Few developments in the tax world have an impact on a truly global scale, but the so-called 'Pillar Two' rules – essentially a global minimum corporate tax – is one of them.

Pillar Two arose from the Organisation for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) project. Agreed in principle in 2021 by around 140 countries, Pillar Two is designed to end the 'race to the bottom' for corporate tax rates and remove the advantages of shifting profits to low-tax jurisdictions.

The rules operate by ensuring that large multinationals (those with consolidated annual revenue exceeding €750 million) pay a minimum 15% effective corporate tax rate in every jurisdiction in which they operate. This is achieved through a series of inter-locking international rules (to be implemented through domestic legislation in adopting countries) which essentially levy a 'top-up tax' on income which is taxed below this level. If the profits of a