BEPS 2.0: Pillar One and Pillar Two

The Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework on Base Erosion Profit Shifting (BEPS) has been continuously evolving to develop an agreement on a two-pillar approach to help address tax avoidance, ensure coherence of international tax rules, and, ultimately, a more transparent tax environment. Today, BEPS 2.0 also looks to address the challenges arising from the taxation of the digital economy.

��㣨Leyu�� professionals can help clients assess the likely impact of the BEPS 2.0 reform package, determine how to access the financial data that will be needed to comply, and restructure operations given the law changes in many countries.

Here we provide information on Pillar One and Pillar Two, including a comprehensive collection of tax-related thought leadership, webcasts and news to help organizations understand the potential impacts of BEPS on multinational organizations globally.

Pillar One: profit allocation and Nexus

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Pillar One, which applies to large multinationals, would reallocate certain amounts of taxable income to market jurisdictions, resulting in a change in effective tax rate and cash tax obligations, as well as an impact on current transfer pricing arrangements. Clients should assess the long-term impact of these changes, as the OECD intends to increase the number of entities subject to Pillar One over time.

The timing for the introduction of Pillar One is unknown and depends on its acceptance by a critical mass of jurisdictions.

Insights

These changes are multinational in scope and, despite simplification compared to previous proposals, remain technically complex.
Digital services taxes and other similar measures are to be repealed under the agreement, but the identification and timetable are not yet clear.
The scope of covered businesses has moved far from the original intention of highly digitalized business models. Extractives and regulated financial services are exempt, but other industries are generally in scope.

Pillar Two: global minimum taxation

Overview of Pillar Two

Pillar Two aims to ensure that income is taxed at an appropriate rate and has several complicated mechanisms to ensure this tax is paid. The rules are complex and will require substantial new forms of financial data that tax departments may not currently have access to within their organization.

On 20 December 2021, the OECD/G20 Inclusive Framework (IF) on (BEPS) released Model Global Anti-Base Erosion (GloBE) rules (Model Rules) under Pillar Two. These Model Rules set forth the “common approach�� for a global minimum tax at 15% for multinational enterprises with a turnover of more than EUR750 million. The IF has continued to release further guidance on the Model Rules, including Commentary, an IF, and various tranches of Administrative Guidance. As of the beginning of 2025, Pillar Two rules are now in effect in over 50 jurisdictions worldwide with further jurisdictions indicating an intention to introduce the rules in the near future.

Insights on Pillar Two

Following the 20 December 2021 release of the Model Rules, the European Commission published the EU Directive to incorporate Pillar Two rules into EU law that expanded the scope of the Pillar Two rules to wholly domestic groups located in the EU, along with certain other modifications to the Model Rules.
The Model Rules did not include a model Subject to Tax Rule (STTR) treaty provision. Instead, a multilateral instrument was developed to facilitate implementation of the STTR in relevant bilateral treaties. A signing ceremony occurred in September 2024 at which stage 9 jurisdictions signed the MLI (Multilateral Instrument).
The OECD continues to issue Administrative Guidance addressing specific provisions of the Model Rules.