OECD Releases Updated Pillar Two Proposal For Global Minimum Effective Taxation

On 12 October 2020, the OECD released for public consultation updated reports on its two-pillar proposal to address the tax challenges of the digitalisation of the economy.

The Pillar One proposal focuses on new nexus and profit allocation rules for certain business models, whereas the Pillar Two proposal pursues more broadly a global minimum effective taxation. The reports identify key issues, both political and technical, where divergences remain to be solved. The goal is to reach consensus amongst the 137 participating jurisdictions by mid-2021. Stakeholders are invited to provide their written comments no later than 14 December 2020.

What is the purpose of Pillar Two?

Pillar Two effectively seeks to enforce a global (yet to be determined) minimum level of effective taxation on income derived by large multinational enterprises (MNEs). To that end, it combines domestic and treaty-based measures that allow the other jurisdictions where the MNE operates (notably