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On 22 December 2021, the European Commission (EC) published its proposal for a Council Directive “on ensuring a global minimum level of taxation for multinational groups in the Union” (Draft Directive) aimed at implementing the OECD Pillar Two Model Rules on a 15% minimum effective tax rate (see our Tax Policy Alert of 20 December) in the EU Member States. 

The Draft Directive closely follows the OECD Model Rules, which set out the rules of the so-called Income Inclusion Rule (IIR) and Undertaxed Payment Rule (UTPR). However it departs from the Model Rules “with some necessary adjustments, to guarantee conformity with EU law.”

In order to be adopted, the Draft Directive will need to be unanimously approved by all 27 Member States. If successfully adopted, Member States shall then implement the rules into their national systems by 31 December 2022 and apply the related implementing provisions starting from 1 January 2023 (for the IIR) and 1 January 2024
(for the UTPR).