Written by 5:35 am European Union

European Union: Preliminary agreement reached on EU’s Pillar 2 Directive

Hungary drops opposition to EU’s Pillar 2 Directive

In brief

In a somewhat surprise move yesterday, it appears EU Member States actually managed to reach preliminary agreement on a minimum level of taxation for largest corporations, also known as the Pillar 2 Directive. The Committee of Permanent Representatives (or “COREPER II”) reached the required unanimous support today.


It is our understanding that the agreement communicated yesterday was at Coreper level, not ECOFIN. Coreper stands for the ‘Committee of the Permanent Representatives of the Governments of the Member States to the European Union’. Its role and different formations is explained in article 240(1) of the Treaty on the Functioning of the EU. Coreper is the Council’s main preparatory body. All items to be included into the Council’s agenda (except for some agricultural matters) must first be examined by Coreper, unless the Council decides otherwise. It is important to note that Coreper is not an EU decision-making body, and any agreement it reaches can be called into question by the Council, which alone has the power to make decisions.

COREPER II (which covers Economic and Financial Affairs, amongst others) agreed unanimously to advice the Council to adopt by written procedure the package deal which includes the EU’s Pillar 2 Directive. While this is an indication that Hungary is on board now, and this could very well lift the blockade existing so far for adopting Pillar 2 at EU level, it is our understanding that in that same meeting Poland had some study reservations on Pillar 2 which it hopes to progress before proceeding to formally adopting the deal by written procedure (a date of Dec 14th was mentioned). The reservation from Poland is the same concern that Poland raised earlier this year, when it vetoed the Pillar 2 Directive in April, namely that Pillar 2 should be analyzed and proceeded together with Pillar 1, as part of the two-pillar proposal. While Poland has reiterated its concern, we do not expect Poland to use its veto this time.


As previously announced, the debate continued after the last formal ECOFIN meeting on 6 December 2022, in which the Pillar 2 Directive was dropped from the agenda at the last minute. The continued discussions were around a “package deal” covering not only the Pillar 2 Directive, but also an €18 billion support package for Ukraine and the adoption of the Hungarian Recovery and Resilience Fund Plan, amongst others. Zbyněk Stanjura, the Finance Minister of Czechia which holds the EU’s presidency until the end of the month, released the following message: “I am very pleased to announce that we agreed to adopt the directive on the Pillar 2 proposal today.

Our message is clear: The largest groups of corporations, multinational or domestic, will need to pay a corporate tax that cannot be lower than 15%, globally”.

As a next step, the formal adoption for all elements of this package deal will be done through written procedure. For the Pillar 2 Directive this means that the Directive has not yet been formally adopted, but will now be adopted by the EU Council in said written procedure, which (after unanimity was reached by COREPER II who prepares Council decisions) is pretty much a formality. Once that has happened, the Pillar 2 Directive will require publication in the Official Journal of the European Union to enter into force.

This development may indeed mean that the EU will be the frontrunner in implementation of Pillar 2, requiring EU Member States to transpose the EU Pillar 2 Directive into domestic laws by the end of 2023 as originally agreed in the Inclusive Framework October 2021 Statement. It seems only a matter of time other jurisdictions that have made such announcements will follow. We are closely monitoring this development and will keep you informed of any updates.


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