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October 11, 2021

OECD releases statement updating July conceptual agreement on BEPS 2.0 project

Executive summary

On 8 October 2021, at the conclusion of a virtual meeting of the OECD1/G202 Inclusive Framework on BEPS3 (the Inclusive Framework), the OECD released a statement reflecting the agreement reached by 136 out of the 140 Inclusive Framework members on core design features of the two-pillar solution developed in the BEPS 2.0 project (October Statement).

The October Statement describes agreed components with respect to both pillars of the project:

  • Pillar One on revisions to nexus and profit allocation rules
  • Pillar Two on new global rules that seek to introduce a minimum tax

The October Statement builds on the statement released in July 2021, providing further specificity on several key parameters. In particular, the amount of residual profit to be re-allocated to market jurisdictions under Pillar One has now been set at 25% (as compared to 20-30% as provided in July) and the rate for the minimum tax under Pillar Two has now been agreed at 15% (as compared to "at least 15%" as provided in July). In addition, other thresholds, rates and administrative mechanisms are covered in the October Statement.

Additional substantive and technical details for key elements of both pillars have not yet been released, including revenue sourcing rules, adjustments for the tax base determination, design of marketing and distribution safe harbor rules, and dispute prevention and resolution rules for Pillar One; as well as rules to address timing differences, simplification mechanisms and transition rules for Pillar Two.

The October Statement includes an annex with further information on plans for implementation, providing generally for entry into effect in 2023, with the exception of the Pillar Two Undertaxed Payment Rule (UTPR) that is to enter into effect in 2024.

The G20 Finance Ministers are scheduled to consider the outcome of the Inclusive Framework meeting at their meeting in Washington on 12-13 October 2021.

Detailed discussion


In March 2018, the OECD released the document Tax Challenges Arising from Digitalisation — Interim Report 2018 as a follow up to 2015 final report on Action 1 of the project on Base Erosion and Profit Shifting. The 2018 Interim Report does not include any specific recommendations, indicating instead that further work should be carried out to understand the various business models operated by enterprises offering digital goods and services, as well as digitalization more broadly.4

In January 2019, the OECD released a Policy Note describing plans for renewed international discussions that were to focus on two pillars: one pillar addressing the broader challenges of the digitalization of the economy and the allocation of taxing rights, and a second pillar addressing remaining BEPS concerns.5 Following the Policy Note, in February 2019, the OECD released a Public Consultation Document6 describing the two-pillar proposals at a high level. The OECD received extensive comments from stakeholders and held a public consultation in March 2019.7

At the end of January 2020, the OECD released a Statement by the Inclusive Framework on BEPS on the Two-Pillar Approach. With respect to both pillars, the documents include new details on the proposed approaches and identify key issues under consideration and areas where more work is to be undertaken.8 In October 2020, the OECD released detailed reports on the Blueprints on Pillar One and Pillar Two, an Economic Impact Assessment of the Pillar One and Pillar Two proposals, a Cover Statement by the Inclusive Framework on the work to date and the next steps and a Public Consultation Document requesting comments on the Blueprints on both pillars.9

Most recently, on 1 July 2021, the OECD released a Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy (July Statement), reflecting the agreement of 130 of the member jurisdictions of the Inclusive Framework on some key parameters with respect to both pillars. At that time, nine members of the Inclusive Framework (Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Peru, Saint Vincent and the Grenadines, and Sri Lanka) did not join the July Statement.10 Barbados, Peru and Saint Vincent and the Grenadines subsequently joined the agreement. At the end of August 2021, Togo joined both the Inclusive Framework and the July Statement.

October Statement

On 8 October 2021, the OECD published a statement11 indicating that the Inclusive Framework has agreed on a two-pillar solution to address the tax challenges arising from the digitalization of the economy. 136 out of 140 jurisdictions of the Inclusive Framework have agreed to the October Statement. Estonia, Hungary and Ireland, which did not join the July agreement, have joined the October Statement. Pakistan, which joined the July statement, has not joined the October Statement. Kenya, Nigeria, and Sri Lanka did not join either statement.

The October Statement updates the July Statement regarding the conceptual agreement on fundamental reforms to international tax rules. The July Statement is described in detail in an EY Global Tax Alert (see endnote 10). Key updates included in the October Statement are outlined below:

Pillar One

  • The scope of Amount A is restated without change as multinational entities (MNEs) with a global turnover above €20 billion and profitability above 10%. These thresholds will be calculated using an average mechanism (this mechanism has not been described in detail).
  • Amount A will allocate 25% of "residual profits", which is defined as profit in excess of 10% of revenue, to market jurisdictions with nexus using a revenue-based allocation key (as compared to the 20-30% range provided in the July Statement).
  • A mandatory and binding dispute resolution mechanism will be available for all issues related to Amount A. For certain developing countries, an elective binding dispute resolution mechanism will be available. The eligibility of a jurisdiction for the elective binding dispute resolution mechanism will be regularly reviewed. If a jurisdiction is found to be ineligible, it will remain ineligible in all subsequent years.
  • The removal of all Digital Services Taxes and other relevant similar measures with respect to all companies will be required by the Multilateral Convention (MLC) through which Amount A is to be implemented. No newly enacted Digital Services Taxes or other relevant similar measures will be imposed on any company from 8 October 2021 and until the earlier of 31 December 2023 or the coming into force of the MLC.
  • The October Statement reiterates that the MLC through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2023.

Pillar Two

  • It is restated that Inclusive Framework members are not required to adopt the Global Anti-Base Erosion (GloBE) rules but if they choose to do so, they should implement and administer the rules in a way that is consistent with the outcomes provided for under Pillar Two, including the model rules and guidance agreed to by the Inclusive Framework. It also is restated that Inclusive Framework members accept the application of the GloBE rules applied by other Inclusive Framework members.
  • The design of Pillar Two is restated, including the GloBE rules, consisting of the Income Inclusion Rule (IIR) and the UTPR, and the Subject to Tax Rule (STTR). Exclusion from the UTPR will be available for MNEs in the initial phase of their international activity (i.e., MNEs with a maximum of €50 million tangible assets abroad that operate in no more than five other jurisdictions). This exclusion is limited to five years after the MNE comes into the scope of the GloBE rules for the first time.
  • In respect of existing distribution tax systems, there will be no top-up tax liability if earnings are distributed within four years (as compared to the three or four years provided in the July Statement) and taxed at or above the minimum level.
  • The minimum tax rate for purposes of the IIR and UTPR will be 15% (as compared to "at least 15%" provided in the July Statement).
  • The substance-based carve out is modified from the July Statement, with a transition period of 10 years (rather than 7 years) during which the amount excluded will be 8% of the carrying value of tangible assets and 10% of payroll, declining annually for the first five years by 0.2 percentage points, and for the last five years by 0.4 percentage points for tangible assets and by 0.8 percentage points for payroll. After the transition period, the amount excluded will be 5% of the carrying value of payroll and tangible assets.
  • A de minimis exclusion is provided for those jurisdictions where the MNE has revenues of less than €10 million and profits of less than €1 million.
  • The nominal tax rate used for the application of the STTR will be 9% (as compared to the 7.5-9% range provided in the July Statement).
  • It is restated that Pillar Two will apply a minimum rate on a jurisdictional basis. It also is restated that in that context, consideration will be given to the conditions under which the United States Global Intangible Low-Taxed Income regime will co-exist with the GloBE rules, to ensure a level playing field.
  • The October Statement reiterates that Pillar Two generally should be brought into law in 2022, to be effective in 2023. However, the entry into effect of the UTPR has been deferred to 2024.


The October Statement includes an annex with information regarding the implementation plan, including target dates.

According to the plan for Pillar One, Amount A will be implemented through an MLC, regardless of whether a tax treaty currently exists. Where necessary, Amount A will also be implemented by way of correlative changes in domestic law. The Task Force on the Digital Economy will seek to conclude the text of the MLC and its Explanatory Statement by early 2022 so that the MLC is open for signature by mid-2022. Jurisdictions will be expected to ratify the MLC as soon as possible after having signed it, with the aim for it to be in force and with effect from 2023. The Task Force on the Digital Economy will also develop model rules for domestic legislation by early 2022.

Pillar Two model rules and accompanying commentary will be developed by the end of November 2021. A model treaty provision to give effect to the STTR also will be developed by the end of November 2021. An MLI will be developed by the Inclusive Framework by mid-2022 to facilitate the implementation of the STTR in bilateral tax treaties. The model treaty provision will be supplemented by commentary that explains the purpose and the operation of the STTR. A process to assist in implementing the STTR will be agreed. By the end of 2022 at the latest, an implementation framework will be developed to facilitate the implementation of the GloBE rules.

Target deadlines

Pillar One

  • Early 2022 – Text of an MLC and Explanatory Statement to implement Amount A of Pillar One
  • Early 2022 – Model rules for domestic legislation necessary for the implementation of Pillar One
  • Mid 2022 – High-level signing ceremony for the MLC
  • End 2022 – Finalization of work on Amount B for Pillar One

Pillar Two

  • November 2021 – Model rules to define scope and mechanics for the GloBE rules
  • November 2021 – Model treaty provision to give effect to the subject to tax rule
  • Mid 2022 – MLI for implementation of the STTR in relevant bilateral treaties
  • End 2022 – Implementation framework to facilitate coordinated implementation of the GloBE rule

2023 – Implementation of the Two-Pillar Solution

Next steps

It is expected that the G20 Finance Ministers will endorse the outcome of the Inclusive Framework meeting at their meeting in Washington on 12-13 October 2021.


The October Statement marks an important milestone in the BEPS 2.0 project on fundamental changes to the global tax rules, with all OECD and G20 countries (including the European Union) now supporting the agreement on key parameters. However, more work will be required to reach agreement on some key design elements of the two pillars. In addition, there is significant work to be done to fill in the substantive and technical details in the development of the planned model rules, treaty provisions, and explanatory material. That work will need to be completed quickly in order to meet the timelines reflected in the implementation plan. It should be noted that while the October Statement provides that the work will continue to progress in consultation with stakeholders, the implementation plan provides limited time for policymakers to engage with businesses and other stakeholders. Therefore, companies that wish to provide input into the process should seek to engage now as the Inclusive Framework turns its attention to the next steps following the October Statement.

It is important for companies to follow these developments closely as they unfold in the coming months and to evaluate the potential impact of the global tax changes on their businesses, especially given the very ambitious implementation timeline. In addition, looking ahead, companies will need to monitor activity in relevant countries related to the implementation of these proposed rules through changes in domestic tax rules and bilateral or multilateral agreements.


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

Ernst & Young Belastingadviseurs LLP, Rotterdam

Ernst & Young Belastingadviseurs LLP, Amsterdam

Ernst & Young Limited (New Zealand), Auckland

Ernst & Young Solutions LLP, Singapore

Ernst & Young LLP (United States), Detroit

Ernst & Young LLP (United States), Global Tax Desk Network, New York

Ernst & Young LLP (United States), New York

Ernst & Young LLP (United States), Global Tax Desk Network, San Diego

Ernst & Young LLP (United States), Seattle

Ernst & Young LLP (United States), Washington, DC



  1. Organisation for Economic Co-operation and Development.
  2. The G20 includes the European Union and 19 individual countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States.
  3. Base Erosion and Profit Shifting.
  4. See EY Global Tax Alert, The OECD's interim report on tax challenges arising from digitalisation: An overview, dated 21 March 2018.
  5. See EY Global Tax Alert, OECD's new insights describe growing support on comprehensive changes to international tax policy, beyond digital, dated 29 January 2019.
  6. See EY Global Tax Alert, OECD opens public consultation on addressing tax challenges arising from digitalization of the economy: time-sensitive issue impacting all multinational enterprises, dated 14 February 2019.
  7. See EY Global Tax Alert, OECD hosts public consultation on document proposing significant changes to the international tax system, dated 18 March 2019.
  8. See EY Global Tax Alert, OECD documents on BEPS 2.0 include new details and identify issues under consideration on Pillar One and Pillar Two, dated 7 February 2020.
  9. See EY Global Tax Alert, OECD's Inclusive Framework releases BEPS 2.0 documents and agrees to continue work with target of conclusion by mid-2021, dated 13 October 2020.
  10. See EY Global Tax Alert, OECD announces conceptual agreement in BEPS 2.0 project, dated 1 July 2021.
  11. Together with the statement, the OECD also released a set of Frequently Asked Questions and a brochure providing additional background and information on this development.