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Pillar Two and the OECD

D4.301 What is the origin of Pillar Two?

For the latest New Developments, see ND.2490 and ND.2751.

A key aspect of the OECD/G20 BEPS Project is addressing the tax challenges arising from the increasing digitalisation of the economy. For instance, many international businesses have set up operations in low tax jurisdictions in which they pay a low rate of tax on the profits generated by the sale of goods or supply of services, despite the fact that their customers may be located in other jurisdictions which would tax those profits at a higher rate if they were actually recognised there.

In October 2021, over 135 jurisdictions signed up to a two-pillar solution to reform the international taxation rules and ensure that large multinational enterprises (MNEs) pay a fair share of tax wherever they operate. This includes an agreement to introduce the following:

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   •ÌýÌýÌýÌý Pillar One – reallocation of profits earned by large MNEs to the market jurisdiction