REPORT FROM THE COMMISSION TO THE COUNCIL Progress Report on Pillar One
Date: 2023-06-30
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: OECD, activity report, corporation tax, group of companies, international convention, international tax law, multinational enterprise, tax avoidance, tax collection

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 30.6.2023  COM(2023) 377 final  REPORT FROM THE COMMISSION TO THE COUNCIL Progress Report on Pillar One  
 
 
1.  Introduction 

The  Global  Anti-Base  Erosion  (GloBE)  Model  Rules  concerning  Pillar  Two  of  the 
October 2021 statement of the Inclusive Framework on Base Erosion and Profit Shifting (IF 
on  BEPS)1  were  approved  on  14  December  2021  and  released  by  the  Organisation  for 
Economic  Co-operation  and  Development  (OECD)  on  20  December  20212.  The  OECD  is 
currently  finalising  the  technical  work  on  certain  aspects  of  the  Administrative  Guidance 
(including  the  Qualified  Domestic  Minimum  Top-up  Tax  Safe  Harbour,  the  Transitional 
Under Taxed Profit Rule Safe Harbour and the GloBE Information return) and plans to wrap 
up this work by July 2023.  

The  GloBE  Model  Rules  concerning  Pillar  Two  were  implemented  in  EU  law  through  the 
Directive on ensuring a global minimum level of taxation for multinational enterprise groups 
and large-scale domestic groups in the Union of 15 December 2022 (Pillar Two Directive).3 
Article 57 of the Pillar Two Directive requires the Commission, by 30 June 2023, to submit a 
report to the Council on the implementation of Pillar One of the October 2021 statement. This 
report  provides  a  brief  assessment  of  the  state  of  play  of  the  negotiations  at  the  OECD  on 
Pillar One. As currently the work on Pillar One is still ongoing at the OECD level, this report 
provides an assessment of the implementation of Pillar One at the time of writing this report. 

2.  Assessment on implementation of Pillar One 

Pillar One is made up of two main components4. Amount A provides a new taxing right over 
a portion of the residual profits5 of the largest and most profitable multinational enterprises in 
the world to market jurisdictions. Amount B aims to simplify and streamline the application 
of the arm’s-length-principle to in-country baseline marketing and distribution activities6.  

The IF on BEPS has shaped the agreement on the key elements of Amount A as reflected in 
the  October  2021  statement.  The  IF  on  BEPS  mandated  the  Task  Force  on  the  Digital 
Economy  (TFDE)  to  advance  with  the  technical  work.  The  July  2022  Progress  Report  on 
Amount A of Pillar One7 identified the following core elements of Amount A:  

 

the  scope  rules  containing  thresholds  designed  to  ensure  that  Amount  A  only  applies  to 
large  and  highly  profitable  groups.  These  rules  exclude  revenues  and  profits  from 
extractives activities and regulated financial services from the scope of Amount A; 

  a special purpose nexus identifying the jurisdictions that are eligible to Amount A, and a 
detailed revenue sourcing rules providing a methodology to determine where the revenues 
of a group are generated; 

1 https://www.oecd.org/tax/beps/statement-on-a-two-pillar-solution-to-address-the-tax-challenges-arising-from-
the-digitalisation-of-the-economy-october-2021.htm 
2 https://www.oecd-ilibrary.org/docserver/782bac33-
en.pdf?expires=1686754557&id=id&accname=oid031827&checksum=CA2158A15A6D3578CA5F47F381F39
C5D 
3 Council Directive (EU) 2022/2523 of 15 December 2022 on ensuring a global minimum level of taxation for 
multinational enterprise groups and large-scale domestic groups in the Union, OJ L 328, 22 December 2022, 
p. 1. 
4 For further details see the Blueprint on Pillar One: https://www.oecd-ilibrary.org/docserver/beba0634-
en.pdf?expires=1686754864&id=id&accname=oid031827&checksum=514DF17DC29D8C2C6CFFDE643BFC
3A6D 
5  For  the  purpose  of  Amount  A,  the  residual  profit  of  the  group  is  identified  as  the  profit  in  excess  of  the  a 
profitability threshold of 10% of the Group Return on Sale. 
6 The  arm’s length principle is the  international standard that OECD  member countries  have agreed should be 
used for determining transfer prices for tax purposes. 
7 https://www.oecd.org/tax/beps/progress-report-on-amount-a-of-pillar-one-july-2022.pdf 

1 

 
 
 
                                                           
 

 

 

the tax base rules providing the steps to calculate the profit (or loss) of a group that will be 
used for Amount A calculation purposes; 
the  profit  allocation  rules  based  on  a  formula  that  allocates  25  %  of  a  group’s  profit  in 
excess of the 10 % profitability on the group’s  revenues to eligible market jurisdictions, 
and takes into account the marketing and distribution safe harbour for market jurisdictions 
that have existing taxing rights over the group’s residual profits; 
rules to eliminate any double taxation that arises from applying Amount A as an overlay 
to the existing profit allocation system;  

  and a tax certainty process for the new Amount A rules and any related issues.  

The  rules  on  Amount  A  that  already  appear  as  agreeable  to  the  members  of  the  TFDE  are 
being  translated  into  provisions  for  inclusion  in  a  Multilateral  Convention  (MLC)  and  an 
Explanatory Statement by the OECD Secretariat. The MLC will establish the legal obligations 
of  the  parties  to  implement  Amount  A  in  a  coordinated  and  consistent  manner.  The 
Explanatory Statement will contain commentaries and interpretations of the MLC rules.  

The technical work of the TFDE is not finished yet. Several meetings have been scheduled in 
the  upcoming  weeks.  The  elements  of  the  MLC  that  are  still  under  discussion  include:  the 
elimination of double taxation, the marketing and distribution safe harbour and the treatment 
of  withholding  taxes,  the  standstill  and  rollback  of  digital  services  taxes  and  other  relevant 
similar  unilateral  measures,  the  implementation  of  an  autonomous  domestic  business 
exemption  and  the  carve-out  for  defensive  revenues,  as  well  as  the  condition  of  entry  into 
force.  

The OECD Secretariat aims to finalise the technical work by 10-12 July 2023 and present the 
package of the MLC and the Explanatory Statement. As jurisdictions need further time, due to 
domestic reasons, before signing the MLC, the signing ceremony of the MLC is expected to 
take place at the end of 2023.  

The  OECD  Secretariat  also  plans  to  have  a  preliminary  agreement  in  July  on  the  main 
components of Amount B subjected to a validation phase to be undertaken by the end of 2023. 
In particular, the OECD aims to reach an agreement on the following elements of Amount B: 
 
the scope, with further work to be undertaken by the end of the year to better define the 
list  of excluded activities and the appropriateness  of the pricing methodology for digital 
goods; 
the opening of a validation phase on the pricing framework that will run till the end of the 
year and that will entail the launch of a new public consultation; 

 

  an  implementation  framework  that  recognizes  that  Amount  B  will  be  included  into  the 
OECD  Transfer  Pricing  Guidelines  in  January  2024,  with  a  review  of  Amount  B  after 
3 years of implementation. 

3.  Conclusion  

The  Commission  welcomes  the  great  efforts  and  the  progress  made  so  far  and  urges  all 
participants to make a final effort to reach an agreement on the MLC to implement Pillar One. 
The Commission strongly supports the OECD Secretariat’s intention to finalise the MLC and 
the Explanatory Statement and present the package in July 2023 to ensure that the MLC could 
be  signed  as  soon  as  possible.  It  provides  a  window  of  opportunity  to  reach  a  historical 
agreement  in  the  area  of  international  taxation  and  complete  the  work  on  the  Two-Pillar-
Solution of the October 2021 statement. The Commission will do its utmost to ensure a timely 
and consistent implementation of Pillar One at EU level. 

2