On 1 July 2021, 130 countries in the OECD/G20 Inclusive Framework (IF) on BEPS (Base Erosion and Profit Shifting) approved a historic statement providing a framework for reform of international tax rules with the ambition of resolving the tax challenges created by digitalisation.

Ireland reserved its position with respect to this July statement, maintaining that any agreement must create certainty for countries and businesses, in particular with respect to the future minimum effective rate of corporation tax that might apply under these proposed rules.

Having secured a commitment that the effective minimum rate of tax imposed on the profits of multinational groups under the agreement would be limited to 15%, Ireland joined the OECD/IF statement released on 8 October 2021, along with 135 other countries. This statement provided a crucial outline of the proposed two-pillar approach to reform of international taxation.

Pillar One aligns taxing rights more closely with local market engagement and departs from using physical presence as a nexus. 

Financial Reporting: the Pillar 2 Impacts

How is Pillar Two affecting your financial reporting disclosures? KPMG Pillar Two experts Jacinta Shinnick, Conor McElhinney and Susan Buggle share insights to help companies navigate some of the challenges coming to light as groups transition into the Pillar Two rules.

Part of our Think Tax video series.

Unprecedented agreement

Pillar Two secures an unprecedented agreement on a global minimum level of taxation for the world’s largest groups. 

On 12 December 2022, the European Council confirmed that the EU reached a unanimous agreement regarding the implementation of the Pillar Two global minimum effective tax rate rules. The Directive will need to be transposed into Member States’ national law by the end of 2023. 

Also in December, the OECD released further components of the Implementation Framework. These addressed guidance on a Transitional Safe Harbour, along with a framework for a permanent safe harbour. In addition, consultations were launched on the GloBE Information Return and on Tax Certainty.

In addition, 2023 has already seen the OECD Inclusive Framework release Administrative Guidance on a wide range of topics, including the design of Qualifying Domestic Minimum Top-up Taxes (QDMTTs) and the treatment of CFC taxes (including GILTI), with much more expected in this regard in the year ahead. 

Pillar One

  • These changes are multinational in scope and, despite simplification compared to previous proposals, remain technically complex and many details remain to be confirmed.
  • Digital Services Taxes and other similar measures are to be repealed under the agreement.
  • Scope of covered businesses has moved far from the original intention of highly digitalised business models. Extractives and regulated financial services are exempt, but other industries are generally in scope.
  • The Pillar One rules remain to be finalised. At present, the OECD aims to have the model rules finalised in the first half of 2023. If these rules are ultimately agreed between Inclusive Framework members, a Multilateral Convention signing ceremony could take place before the end of June 2023, with the rules coming into force in 2024.

Pillar Two

  • The objective of Pillar 2 is to ensure that groups with a turnover of over €750m pay a 15% minimum rate of tax in every jurisdiction in which they operate.
  • Inclusive Framework members are not obliged to adopt the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR) (the “GloBE” rules) but must accept the application of the rules by other IF members.
  • OECD model GloBE rules were published in December 2021, with OECD Commentary on the rules, as well as illustrative examples, being published in March 2022.
  • An EU Directive implementing the GloBE rules was agreed in late 2022 following prolonged negotiation between the European Commission and EU member states. Under the Directive, the rules with respect to the IIR will take effect for accounting periods commencing on or after 31 December 2023. For in-scope MNE Groups with calendar year ends, this means the IIR should first apply to FY2024. The UTPR will then apply a year later.
  • Draft legislation to implement the rules has already been released by a number of countries, including the United Kingdom, Germany, Switzerland, and Japan, while Korea has already enacted legislation implementing the IIR rules from 2024. Korea has also included the UTPR from 2024, however that may be subject to change.
  • The October 2021 agreement also includes plans to implement a Subject to Tax Rule (STTR), a treaty-based rule that allows source jurisdictions to impose limited source taxation on certain related party payments that are subject to tax below a minimum rate. Model provisions with respect to this rule were not included in the GloBE model rules released in December 2021.

BEPS 2.0 - further reading

Global BEPS 2.0 Model - powered by KPMG Digital Gateway

KPMG’s technology-based approach allows organisations interested in understanding the likely impact of BEPS 2.0 to undertake a rapid assessment requiring only several hours of effort. The tool can:

  • Assess your potential cash tax and potential effective tax rate
  • Provide detailed quantitative analysis and summary reports with flexible visualisations
  • Support in identifying necessary restructuring work
  • Help inform policy advocacy
  • Support in developing communication plans for key stakeholders that will help guide your organisation's current and future actions


For further insights, please visit the Digital Economy section of TaxWatch, KPMG's client-only portal of publications on topical tax issues.

Get in touch

The pace of change is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with our team below. We’d be delighted to hear from you. 

More in Tax