The Inclusive Framework Agreement on Global Tax Reform: Highlights and Takeaways

Year: 2021

The much-anticipated Inclusive Framework agreement that has been agreed by 130 member jurisdictions (out of the 139 members) on the two-pillar solution to address the tax challenges of the digital economy was released by the OECD on 1 July 2021.

This is FMG’s quick summary on the key highlights and takeaways.


Pillar 1

Who are caught?

MNEs with global annual turnover >Euro 20 billion & >10% profitability, with exclusion for Extractive and Regulated Financial Services.

What is subject to Pillar 1 taxation? 

Reallocation amount will be on profits above a 10% threshold, whereby 10-20% of profit will be reallocated (e.g. if a MNE Group has a profit margin of 26%, between 1.6%-3.2% can be reallocated.

Key Takeaway: Unless you are one of the corporate giants, most MNEs can safely put aside the Pillar 1 blueprint. The only space that might be worth monitoring relates to simplification measures that will apply to marketing and distribution companies.

Pillar 2

Who are caught?

MNEs with global revenue >Euro 750 million with no change to the carve out sectors. However, countries may also apply these rules to MNEs with lower revenue thresholds.

What is subject to Pillar 2 taxation? 

(i)  Profits which are subject to tax of <15%, computed on a country-by-country basis, will be subject to a top-up tax. Substance based carve outs and de-minimis exclusions will apply to reduce the top-up tax payment required.

(ii)  Limited source taxation on certain related party payment rates below 7.5%-9% will be permitted and will be creditable.

Key Takeaway: The writing is on the wall – the minimum global taxation of 15% is here to stay.  For MNEs with global revenue exceeding Euro 750 million, it is time to start doing projections and planning your C-Suite communications strategy and mitigation options.


Annalise Foong is the Director of Financial and Tax Advisory at the Future-Moves Group. She has extensive experience in this field, in particular with a focus on Compliance, Tax Policy and Transaction Advisory. If your organisation is grappling with a complex tax puzzle and looking for professional and practical consultancy support, do get in touch at