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Update: G20 endorses OECD Inclusive Framework progress on Pillar One & Two

Raphaël Matthys Director, Corporate Tax, PwC Switzerland 14 Jul 2021

The G20 Finance Ministers and Central Bank Governors gathered in Venice on 9/10 July, where they continued their discussions on issues related notably to global economy and health, efforts to address climate change, international tax issues and policy options on digital transformation and production recovery.

Prominent amongst these discussions was the progress made by the OECD/G20 Inclusive Framework (“IF”) on Base Erosion and Profit Shifting (“BEPS”) towards the design of a more stable and fairer international tax architecture as reflected in the IF Statement published last week, the detail of which was discussed in our 2 July 2021 Update.

In their Communique, the G20 Finance Ministers endorsed the key components of the two-pillar approach on the reallocation of profits of multinational enterprises (“MNEs”) and an effective global minimum tax based on the framework agreement reached by 132 of the 139 IF members. The G20 called on the IF members to finalize the design elements within the agreed framework together with a detailed implementation plan of the two pillars by the next G20 meeting in October. The G20 also called on the remaining IF members - who have yet not signed the IF Statement - to do so as soon as possible. Note that the Communique - as well as the OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors - mentions the need for consultation process with developing countries, many of them having reservations regarding Pillar One’s narrowed scope.

Key takeaways and next steps

In combination with the OECD/G20 IF statement, the G20 Communique proves the global commitment towards adjusting the international tax system in order to better address the challenges arising out of the digitalization of the economy. There is – with a few exemptions only and with some reservations by some other countries, including Switzerland - broad consensus on the need for a multilateral solution, preventing a myriad of unilateral responses (e.g. digital service taxes), which would create further complexity, double taxation and political tensions among countries. This includes the United States, who are strongly supporting progress of the OECD project. Albeit the US are unlikely to adopt Pillar Two as such, the Biden Administration has already proposed changes to its BEAT and GILTI regimes to align with key elements of Pillar Two.

In line with the above, the European Commission announced on 12 July that it was delaying the release of its proposals towards an EU Digital Tax Levy until October.

The next phase involves technical discussions around how the two-Pillar rules will work in practice. Considering the October timeline, the OECD needs now to work quickly on the remaining technical details and unresolved issues.

Afterwards, assuming a final agreement on both Pillars is reached by the IF members in October, there will be not much time for all jurisdictions to implement legislation and treaty changes to reflect agreed rules considering that the IF proposed that the new rules should become effective in 2023. The ability of all jurisdictions to quickly legislate for the proposals will thus be an important consideration.

Considering current stage of the discussions and achieved agreement, the additional guidance provided by the statement and the expected timelines, the following recommendations can be made for MNEs that meet the size thresholds:

  • Watch the space regarding the conclusion of the further work by the OECD on the Pillar One and Two proposal details to be communicated by October this year – you can track these together with us here
  •  Perform, respectively update, assessments of the potential applicability of Pillar One and Pillar Two for your organization and related quantitative impacts including anticipated implementation responses by different jurisdictions including Switzerland – don’t hesitate to reach out to our experts for more information. We will be happy to support you with our easy-to-apply impact simulation tools. 

Contact us

Markus Prinzen

Partner and Leader Corporate Tax Services, Zurich, PwC Switzerland

+41 58 792 53 10


David McDonald

Partner and Leader FSTP PwC Europe, Zurich, PwC Switzerland

+41 75 413 19 10


Armin Marti

Partner and Leader Tax Policy, Zurich, PwC Switzerland

+41 58 792 43 43


Dominik Birrer

Partner Tax , Luzern, PwC Switzerland

+41 58 792 43 22


Jim Matthews

Partner, Transfer Pricing and Value Chain Transformation, Geneva, PwC Switzerland

+41 58 792 95 60


Rolf Röllin

Director - Corporate Tax, Zug, PwC Switzerland

+41 58 792 68 90


Jacob Parma

Director - Transfer Pricing & Value Chain Transformation, Zurich, PwC Switzerland

+41 58 792 44 87


Etienne Michaud

Manager - Transfer Pricing and Value Chain Transformation, Geneva, PwC Switzerland

+41 58 792 96 70


Raphaël Matthys

Director, Corporate Tax, Zurich, PwC Switzerland

+41 58 792 9346