EU: Proposal for EU minimum tax directive; update after ECOFIN Council meeting

EU Member States were unable to reach political agreement on the minimum tax directive proposal.

EU Member States were unable to reach political agreement.

The final scheduled meeting of the Economic and Financial Affairs Council of the EU (ECOFIN Council) under the French Presidency of the ECOFIN Council took place today.

Despite Poland lifting previous reservations, the EU Member States were unable to reach political agreement on the minimum tax directive proposal due to a change in position by Hungary, which decided to veto the proposal despite having agreed to support the initiative at previous ECOFIN Council meetings.

Concerns previously raised by Poland on treating the two-pillar solution as a package were addressed in documents that had not been made public at the time of the release of this report. 


The European Commission published the initial minimum tax proposal in December 2021 after the OECD published its Model Rules for the Global Anti-Base Erosion Rules (GloBE Rules) two days before, on 20 December 2021. Following technical discussions in the Council working groups, a compromise text was published on 12 March 2022 in advance of the ECOFIN Council meeting (15 March 2022) and provided for several amendments in order to make reference to the ongoing work of the OECD and to rectify areas of discrepancy between the Model Rules and the initial text.

Due to concerns raised by certain EU Member States in respect of the short implementation timeline, an option for EU Member States to defer the application of the “income inclusion rule” (IIR) and the “undertaxed payment rule” (UTPR) when a small number of ultimate parent entities (UPEs) of in-scope multinational entity (MNE) groups are located in those EU Member States (optional IIR and UTPR deferral) was introduced.

Following discussions in ECOFIN Council working groups, a revised compromise text (28 March 2022) was discussed at the ECOFIN Council meeting on 5 April 2022 that provided for a deferral of up to six years when a maximum number of 12 UPEs are based in an EU Member State.

Throughout the negotiations process, Poland expressed concerns regarding the adoption of the directive independent of Pillar One and was therefore not in a position to agree to the compromise text that was accepted by all other EU Member States.

Update from today’s meeting

During the meeting, Commissioner for Economy, Mr. Paolo Gentiloni, noted the willingness of the European Commission (EC) to confirm its full political investment in both pillars, which does not mean creating a legal link between the implementation of the two pillars in the EU.

  • In order to formalize this commitment, the EC noted that it will submit a statement to be attached to the minutes of the ECOFIN Council meeting, confirming their intention to put forward a legislative proposal on Pillar One once the work at OECD level is mature enough.
  • The EC furthermore confirmed that it will continue to monitor closely negotiations on the Pillar One multilateral instrument and intends to submit a report on Pillar One to the ECOFIN Council by June 2023, and assess the situation accordingly with a view to submitting a related proposal, if needed. If Pillar One does not become reality at international level, the EU still has to determine that challenges arising from the digitalization of the economy are addressed.

What’s next?

In light of the proposed amendments to the compromise text and the commitments provided by the European Commission in relation to the implementation of Pillar One, Poland advised that it could lift its reservations.

However, the Hungarian delegation advised that it was no longer in a position to support the proposal at this time, citing concerns regarding the economic consequences of introducing the minimum tax directive in the context of the impact of the unfavorable geopolitical situation in the region. Furthermore, Hungary noted the need for further work on substantial and procedural questions related to the new rules and also highlighted the expected delay in the Pillar One implementation timeline.

The chair of the meeting, French Finance Minister Bruno Le Maire, as well as Commissioner Gentiloni, noted that they remain optimistic that the concerns raised by Hungary can be resolved and that political agreement can nevertheless be reached before the end of the French Presidency (30 June 2022).

If the French Presidency of the Council is not able to facilitate political agreement on the general approach on the EU minimum tax directive before the end of June 2022, observers believe that it is likely that this topic will be added to the agenda of the first ECOFIN Council meeting under the Czech Presidency of the Council, which is scheduled for 12 July 2022.

For more information, contact a tax professional with KPMG’s EU Tax Centre:  

Raluca Enache |

Vinod Kalloe |

Cormac Golden |

Marco Dietrich |


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