On the 12th of December 2022, European Member States came to a landmark agreement on the implementation of Pillar II.  

What is Pillar II?

Pillar II is a result of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), whereby almost 140 countries came to an agreement on the need for a reform in the international taxation sphere.

Pillar II aims at preventing profit shifting and preventing aggressive tax planning by ensuring that large multinational groups of companies pay a minimum tax rate.

Why now?

This particular proposal has been discussed and debated for years within the European Union, with the delay in implementation attributable to the fact that unanimous consent is required for matters of taxation. Nevertheless, unanimity was finally reached this week and, consequently, an EU directive to this effect will be implemented.

What to expect from the Directive

In essence, the Directive shall impose a global minimum tax rate for multinational enterprise groups and large-scale domestic groups in the Union.

Large multinational enterprises (MNEs) will be subject to a minimum tax rate of 15%. Therefore, an additional amount of tax (a ‘top-up tax') should be collected in situations where the effective tax rate of an MNE in a particular jurisdiction is less than 15%.

Which enterprises will fall under Pillar II?

Pillar II will only apply to those entities within the European Union which are members of MNE groups or large-scale domestic groups and which meet the annual threshold of at least EUR 750,000,000 of consolidated revenue.

Are there any exceptions?

Some entities which originally fall within Pillar II may be excluded, depending on their purpose. Examples include those entities which carry out activities in the general interest, such as public health care, education or the building of public infrastructure. Hence governmental entities, international organisations, pension funds, and non-profit organisations fall outside the scope of the Directive.


Member States must transpose the Directive into local legislation by no later than the 31st of December 2023.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.