Pillar 2: model rules to implement international tax reform published

The OECD published on 20 December 2021 the technical details of the implementation of "Pillar 2" to establish minimum taxation of multinational groups. The general architecture of the rules is consistent with announcements made by the OECD in previous publications, but the published document includes many details on all the components of the "GloBE" framework.

The model rules provide many elements for identifying Pillar 2 entities.

The mechanisms for applying the income inclusion rule and the under-taxed payments rule are detailed, as are the rules for calculating the effective tax rate of potentially under-taxed entities.

There are also several articles on the impact of restructurings and more generally of changes in the perimeter of groups on the personal scope of the new rules. Many details are also provided on how the system works in the case of joint ventures, holding companies or fiscally transparent entities. Finally, one of the chapters of the document published on 20 December specifies the transitional rules that will apply on entry into the system.

The administrative operation of Pillar 2 is mentioned but not very extensively. In particular, the simplification rules that would allow certain companies to be exempted from all the calculations of the effective rate when they are established in high-tax countries are only briefly developed. Nevertheless, the model rules already provide that eligibility for the "safe harbour" mechanism will not apply in a certain number of cases. The press release accompanying the publication of the model rules announces that the implementation framework of Pillar 2, in which the simplification rules will be included, will only be published in "early 2022".

More generally, the model rules provide for an incomplete picture of Pillar 2 as the technical details of the subject to tax rule are still awaited and Pillar 2 will have to be adapted to the European legal order by way of a directive.

A reading of the model rules published on 20 December confirms the extreme complexity of the future scheme, as evidenced by the 17 pages devoted to the definitions of the concepts used by the rules.

If it is confirmed that Pillar 2 will have to be applied from 2023 onwards, companies falling within its scope will have to adapt under extreme conditions to these new tax obligations.