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November 20, 2023

European Commission and Council release statements on BEPS 2.0 progress

  • During the ECOFIN meeting on 9 November, Finance Ministers of the European Union (EU) adopted a Council Statement (accompanied by a Commission Statement) welcoming the progress on BEPS 2.0.
  • On Pillar One, the Council and the Commission acknowledged the progress made on the Multilateral Convention on Amount A and reiterated the importance of Amount B.
  • On Pillar Two, the Statement addresses the compatibility of Administrative Guidance issued by the OECD/G20 Inclusive Framework on BEPS in December 2022, February 2023 and July 2023 with the EU Minimum Tax Directive.

Executive summary

On 9 November 2023, the Council of the European Union (the Council) held an Economic and Financial Affairs Council (ECOFIN) meeting where Finance Ministers adopted a Council Statement welcoming the progress on the Base Erosion and Profit Shifting (BEPS) 2.0 project. The Council Statement was published together with a Statement by the European Commission (the Commission).

On Pillar One, both the Council and the Commission take note of the progress made by the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on BEPS (Inclusive Framework) on the Multilateral Convention on Amount A.1 In its Statement, the Commission calls on EU Member States to swiftly sign and ratify the Multilateral Convention (MLC). Support was also expressed for Amount B,2 which remains a key component of the agreement for the Commission.

On Pillar Two, the Council welcomes the Commission's view that Administrative Guidance issued by the Inclusive Framework in December 2022,3 February 2023,4 and July 20235 (the Guidance), including the Safe Harbors, is compatible with the Minimum Tax Directive. The Council also reiterates the need for Member States to remain consistent with the aforementioned guidance when transposing the Directive.

Detailed discussion


With the objective of ensuring that the Global anti-Base Erosion (GloBE) Model Rules, as agreed by the Inclusive Framework on 20 December 2021,6 were implemented in a coordinated manner throughout the Union, the EU adopted on 15 December 2022 a Directive setting forth rules to ensure a global minimum level of taxation for multinational groups (MNE Groups) in the Union (Minimum Tax Directive or the Directive).7 EU Member States have until 31 December 2023 to transpose the Directive into national legislation with the rules to be applicable for fiscal years starting on or after 31 December 2023, with the exception of the undertaxed profits rule (UTPR), which in most cases will apply for fiscal years starting on or after 31 December 2024.

Notwithstanding the abovementioned deadlines, under Article 50 of the Directive, Member States in which there are no more than 12 Ultimate Parent Entities (UPE) of in-scope MNE Groups can choose not to apply the income inclusion rule (IIR) and UTPR for six consecutive fiscal years beginning from 31 December 2023. For MNE Groups headquartered in a Member State that makes this election, the Directive requires that other Member States apply the UTPR to their constituent entities for fiscal years beginning from 31 December 2023.

While Member States have been working on the transposition and implementation of the Directive, the Inclusive Framework released Administrative Guidance in December 2022, February 2023 and July 2023. In some cases, the Guidance introduces additional provisions, including Safe Harbors, raising the question of whether this part of the Guidance would be compatible with the Directive. Also, Member States that had advanced their legislative process well before July 2023 could not take account the Guidance that was yet to be adopted, increasing the risk of divergent implementation across the EU.

The relevance of the Guidance as an interpretation instrument is confirmed by the Member States themselves, having confirmed in the Directive's "recital 11" that the Directive "should be interpreted in the light of any further guidance provided by the OECD, which should be taken into account by Member States in order to ensure a uniform identification of the covered taxes of all Member States and third-country jurisdictions." Recital 22, in turn, states that "Further guidance to be developed in the OECD's GloBE Implementation Framework will be a useful source of illustration and interpretation in that respect, and Member States might choose to incorporate such guidance into domestic law."

Under Article 32, the Directive foresees the introduction of Safe Harbors. This provision deems the top-up tax due by a group in a jurisdiction to be zero if the level of taxation fulfils the conditions of a "qualifying international agreement on safe harbors" (i.e., an international set of rules and conditions to which all Member States have consented). Thus, for the enactment of a Safe Harbor, all Member States should consent, by the date of enforcement of the Directive.

In June 2023, the Minister of Finance of Cyprus confirmed the country's consent to the transitional Country-by-Country Reporting (CbCR) Safe Harbor as agreed by the Inclusive Framework on 15 December 2022. In addition, in October 2023, Cyprus consented to the Qualified Domestic Top Up Tax (QDMTT) and the transitional UTPR Safe Harbors as agreed by the Inclusive Framework on 13 July 2023. As Cyprus is not a member of the Inclusive Framework, it has not participated in the Pillar Two negotiations at OECD level. By providing its full assurance that it consents to the Pillar Two Safe Harbors, Cyprus enables Article 32 of the Minimum Tax Directive to come into effect, considering that all other Member States expressed their consent in the Inclusive Framework.

As Pillar Two implementation progresses, work on Pillar One advances at a slower pace within the Inclusive Framework. On 30 June 2023, as required by the Minimum Tax Directive, the Commission released a Progress Report outlining the state of play on Pillar One and reiterating the Commission's commitment to push for timely and consistent implementation of Pillar One at EU level. On 11 October 2023, the Inclusive Framework released draft text of the MLC to implement Amount A of Pillar One, reflecting the current consensus among Inclusive Framework-member jurisdictions on the design of Amount A and approved for publication by the Inclusive Framework.

On 9 November 2023, during the ECOFIN meeting, EU Finance Ministers adopted a Council Statement welcoming the progress on BEPS 2.0, responding to a Commission Statement on the same matter.

Commission Statement

Pillar One

On Pillar One, the Commission welcomes the release of the draft MLC and the technical agreement reached on key points of Amount A, while stressing that Amount B is also an important component in the reform of international taxation, simplifying transfer pricing and enhancing legal certainty.

In addition, the Commission calls the Member States to swiftly sign and ratify the MLC.

Pillar Two

Welcoming the Council statement (discussed below), the Commission expresses the opinion that Administrative Guidance released by the Inclusive Framework in December 2022, February 2023 and July 2023 is compatible with the Minimum Tax Directive.

Considering that transposition of the Directive is due by 31 December 2023, the Commission encourages Member States to proceed with domestic legislative processes necessary.

Council Statement

Pillar One

The Council welcomes the progress made by the Inclusive Framework on finalizing the MLC implementing Pillar One, to be swiftly open for signature, and notes the progress made on Amount B. It reiterates support to the ongoing work in this area, taking into account the interests of all Member States to ensure that all enterprises pay their fair share of tax on profits generated by their activities in the EU.

In December 2022, the Council tasked the Commission with presenting an alternative legislative proposal in case of absence of agreement on Pillar One. However, the Council Statement makes no reference to challenges in reaching agreement on Pillar One before this deadline. There is also no reference to the anticipated expiration of the standstill commitment.8

Pillar Two

Regarding Pillar Two and the compatibility of the Inclusive Framework Guidance with the Minimum Tax Directive, the Council "welcomes and supports the agreement reached by the Inclusive Framework on the clarifications concerning application of Pillar Two … including the transitional Undertaxed Profits Rule and Qualified Domestic Minimum Top-up Tax Safe Harbours" and "in particular" the abovementioned view of the Commission that the Guidance is compatible with the Minimum Tax Directive.

In addition, the Council "recognizes the need to ensure consistency with the aforementioned documents when applying the Pillar Two Directive by Member States in order to avoid non-alignment or applicability of diverging standards."

Neither Statement addresses specific scenarios in which inconsistent implementation may arise.


Although both Statements are relatively short, they should be taken into account when looking at the implementation of BEPS 2.0 commitments by the Member States.

The Statements can be seen as a signal of the EU's continued commitment to Pillar One, despite expected delays in the adoption of the Amount A MLC. An alternative legislative proposal is not yet on the table in the EU. Businesses in scope of Amount A and those subject to digital services taxes should continue to watch these developments closely.

Concerning Pillar Two, the Council Statement can be read as a commitment of the Member States to implement the Directive in accordance with the Guidance, including all Safe Harbors. The Commission's confirmation of the compatibility of the Guidance with the Directive gives Member States the assurance that the Commission will review the Member States' domestic Pillar Two rules in accordance with the Guidance.

Although the Commission takes the position that the Guidance is compatible with the Directive, the Statements do not constitute a strong legal directive to include the Guidance in the Member States' domestic laws. This leaves open the question how to deal with situations in which the Guidance has introduced new rules or otherwise leads to a different result for taxpayers than the rules of the Directive. Ultimately, it will be up to the Court of Justice of the EU to determine whether the Guidance and the Directive are compatible and to assess which rules should take precedence.

Finally, the Statements do not address diverging implementation of the minimum tax rules resulting from, for example, the deferral of the rules by some of the smaller Member States or the delayed implementation in Member States that miss the transposition deadline. As Member States continue their implementation processes, in-scope businesses should carefully assess the local rules, the elections made under the Directive and the alignment between the Directive and the Guidance.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

EY Studio Legale Tributario, Treviso

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor


1 See EY Global Tax Alert, OECD releases Multilateral Convention to implement Pillar One Amount A, dated 30 October 2023.

2 See EY Global Tax Alert, OECD releases public Consultation Document on Pillar One Amount B on baseline distribution, dated 26 July 2023.

3 See EY Global Tax Alert, OECD/G20 Inclusive Framework releases document on Safe Harbors and penalty relief under Pillar Two GloBE rules, dated 21 December 2022.

4 See EY Global Tax Alert, OECD/G20 Inclusive Framework releases Administrative Guidance under Pillar Two GloBE Rules: Detailed Review, dated 9 February 2023.

5 See EY Global Tax Alert, OECD/G20 Inclusive Framework releases additional Administrative Guidance on Pillar Two GloBE Rules: Detailed review, dated 21 July 2023.

6 See EY Global Tax Alert, OECD releases Model Rules on Pillar Two Global Minimum Tax: Detailed review, dated 22 December 2021.

7 See EY Global Tax Alert, EU Member States unanimously adopt Directive implementing Pillar Two Global Minimum Tax rules, dated 15 December 2023.

8 See EY Global Tax Alert, OECD releases outcome statement on progress on Pillars One and Two of BEPS 2.0 project, dated 12 July 2023.


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