On 1 July 2021, 130 countries in the OECD/G20 Inclusive Framework (IF) on BEPS (Base Erosion and Profit Shifting) approved an 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. Pillar Two secures an unprecedented agreement on a global minimum level of taxation for the world’s largest groups. 

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  • Digital Services Taxes and other similar measures are to be repealed under the agreement.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. The model rules are expected to be finalised in 2022 and take effect from 2023.  In early 2022, the OECD aims to finalise the text of a Multilateral Convention (MLC) and an explanatory statement to implement Amount A. The OECD has set the end of 2022 as the target for completing work on Amount B. 

Pillar Two

  • If 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 a draft EU Directive implementing these rules published shortly thereafter.
  • The European Commission has targeted that the Directive implementing the GloBE rules would be agreed in 2022, taking effect from the beginning of 2024 with respect to the IIR, with UTPR applying a year later.
  • The October 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.




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.

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