On October 8, 2021, major reform of the international tax system was finalized to ensure that multinational enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023.
136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. With Estonia, Hungary, and Ireland having joined the agreement, it is now supported by all OECD and G20 countries. Four countries - Kenya, Nigeria, Pakistan, and Sri Lanka - have not yet joined the agreement.
Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest and most profitable multinational enterprises. It will re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.
Pillar Two introduces a global minimum corporate tax rate set at 15%. The new minimum tax rate will apply to companies with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually.