International community strikes a ground-breaking tax deal

On 8 October 2021, a landmark deal has been agreed by 136 countries and jurisdictions representing more than 90% of global GDP to implement the Two-Pillar Solution. The Pillars are aimed at solving tax challenges arising from the digitalization of the global economy. It is estimated that a significant amount of the world’s largest Multinational Enterprises (MNEs) will be impacted by both Pillars. The landmark deal will ensure that MNEs will be subject to a minimum 15% tax rate as from 2023. It will also ensure that more than USD 125 billion of profits of around a hundred of the world’s largest (and most profitable) MNEs will be reallocated, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.

12 Oct. '21 3 min. Yoran Noij

Pillar One

Pillar One, in general, offers a new taxing right for market jurisdictions focusing on the demand side (where customers are based) over a share of residual profit (Amount A) and a fixed return for (standardized) routine marketing and distribution activities (Amount B). It is expected that large online sales and technology companies making distance sales of digital products and/or services will be affected. Specifically, MNEs with global sales above EUR 20 billion and profitability above 10% will be covered by the new rules. The OECD expects that taxing rights on more than USD 125 billion of profit to be reallocated to market jurisdictions each year. Hence, Pillar One will have a key impact on global transfer pricing as it deviates from existing transfer pricing practices/guidance that focus more on production/development vs. demand factors (market/customers etc.). Pillar One also offers some benefits as it will replace domestic Digital Service Taxes and increases tax certainty through mandatory and binding dispute resolution.

Pillar Two

Pillar Two provides that, if the effective tax rate of an MNE is below the global minimum tax rate of 15%, its parent or subsidiary companies will be required to pay up tax putting a floor on tax competition. By doing so Pillar two offers a series of Global Anti-Base Erosion (GloBE) provisions that consist of (i) domestic rules (Income Inclusion Rule and Undertaxed Payment Rule) and (ii) treaty based rules ensuring that treaty benefits are only granted for (say) interest and royalties if they are subjected to tax at a minimum rate. Due to the landmark deal the new minimum tax rate will apply to companies with revenue above EUR 750 million. The minimum tax rate is estimated to generate around USD 150 billion in additional global tax revenues annually.


Countries are aiming to sign a multilateral convention during 2022, with effective implementation in 2023. The convention is already under development and will be the vehicle for implementation of the newly agreed taxing right under Pillar One, as well as for the standstill and removal provisions in relation to all existing Digital Service Taxes and other similar relevant unilateral measures. The OECD will develop model rules for bringing Pillar Two into domestic legislation during 2022, to be effective in 2023. See the table below for a more detailed breakdown of the timing.

We are currently working on a booklet clarifying two Two-Pillar Solutions and its impact on day-to-day transfer pricing. Once available we will share this on our site.


The information contained in this publication is of general nature and does not address the specific circumstances of any particular individual or entity. Hence, the information in this publication is intended for general informational purposes and cannot be regarded as advice. Although we endeavour to provide accurate and timely information and great care has been taken when compiling this publication, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. We do not accept any responsibility whatsoever for any consequences arising from the information in this publication being used without our consent.

Yoran Noij

Yoran is an associate and member of the Dutch Association of Tax Advisers (NOB)

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