EMEA Tax & Legal Insurance Newsflash
European Union
Pillar 2 - Country Updates
EU Infringement Action against certain states
Nine member states of the European Union – Estonia, Greece, Spain, Cyprus, Latvia, Lithuania, Malta, Poland and Portugal – have failed to transpose the Pillar 2 Directive into national legislation by the deadline of 31 December 2023.
Therefore the European Commission adopted infringement decisions against those member states.
Austria
The Austrian Pillar Two legislation was enacted in December 2023 and published in the Austrian Official Gazette on 30 December 2023. The transposition of the EU minimum tax Directive in Austria is through a separate law which foresees the implementation of an IIR (for fiscal years starting on or after 31 December 2023), a UTPR (for fiscal years starting on or after 31 December 2024) and a QDMTT (for fiscal years starting on or after 31 December 2023).
Bulgaria
The EU global minimum tax Directive is transposed into the Bulgarian Corporate Income Tax Act. The amendment to the CIT Act was promulgated in the State Gazette, in force as of 1 January 2024.
Ireland
On 18 December 2023 the Finance Bill 2023 was signed into law, thereby implementing the Pillar II rules. They will take effect for in-scope businesses with accounting periods beginning on or after 31 December 2023.
Ireland followed the overall implementation timeline proposed by the Directive (EU) 2022/2523 of 14 December 2022. Meaning that the income inclusion rule (IIR) and qualified domestic minimum top-up tax (QDMTT) provisions apply for financial years starting on or after 31 December 2023. The undertaxed profits rule (UTPR) will apply for financial years starting on or after 31 December 2024.
Ireland has also implemented the OECD Administrative Guidance of December 2023 into domestic legislation, to take effect for accounting periods beginning on or after 31 December 2023.
Lithuania
On 13 March 2024, the Lithuanian Ministry of Finance submitted the Draft Law on Ensuring the Minimum Level of Taxation for Multinational Enterprise Groups (Draft Law) for coordination with the public, which was prepared in regards to the implementation of Pillar Two Directive (Council Directive (EU) 2022/2523 of 12/15/2022). Thus, the Law on Corporate Income Tax will not be amended as the draft of the new law has been proposed.
The Ministry of Finance, as presented in the meeting regarding the implementation of the Pillar Two Directive held on 7 September 2023, plans to postpone its implementation by 6 years, reasoning that: (i) the number of main parent units falling within the scope of the Pillar II Directive will not exceed 5; (ii) postponement could provide legal certainty, (iii) postponement could reduce the risk of a disproportionate tax administration burden.
Luxembourg
Luxembourg implemented the Pillar Two rules in line with the Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union. On 20 December 2023, the law was adopted by the Luxembourg Chamber of Deputies.
The implementation of the EU Pillar Two Directive is through a separate law which foresees the implementation of 3 new taxes in Luxembourg, an Income Inclusion Rule tax (for fiscal years starting on or after 31 December 2023), an Undertaxed Profits Rule tax (for fiscal years starting on or after 31 December 2024) and a Qualified Domestic Minimum Top-up Tax (for fiscal years starting on or after 31 December 2023).
The law closely follows the EU Pillar Two Directive and the Transitional Safe Harbour Rules issued by the OECD in December 2022. The law currently includes most of the provisions of the Administrative Guidance which was released by the OECD in February and July 2023.
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