The prospect of an EU Directive on the introduction of pillar one in the European Union: Any possible deviations from the OECD blueprint ?

La perspectiva de una Directiva de la UE sobre la introducción del pilar uno en la Unión Europea: ¿Posibles desviaciones del proyecto de la OCDE?

Abstract

The European Commission, in its Communication COM(2021)251 final, has indicated its intention to submit a proposal for a Directive aimed at introducing Pillar One in the European Union. Pillar One would attribute taxing rights to market jurisdictions regardless of the physical business presence in these jurisdictions, thereby creating an additional nexus for taxation. As the OECD has published in 2020 an extensive blueprint on Pillar One —a blueprint covering all aspects of its design and implementation— the crucial issue arises as to whether an EU Directive on Pillar One should completely follow the OECD blueprint or should diverge from this blueprint in specific aspects. The paper argues that an EU Directive on Pillar One should diverge from the OECD blueprint in at least three respects: the scoping rules with regard to identification of MNEs covered by Pillar One, the treatment of «paying entities» creating subsidiaries vs. the treatment of paying entities creating branches in the market jurisdiction, and the one-stop-shop approach. The paper submits that diverging from the OECD blueptint in these aspects would be appropriate in light respectively of State aids rules, of the need to ensure consistency with fundamental freedoms and of the administrative simplification objective, consistently with the longer term strategy indicated in Communication COM(2021)251 final.