OECD Tax Developments and M&A

In this Chambers expert focus podcast, Devon Bodoh and Jenny Doak of Weil, Gotshal & Manges LLP discuss OECD tax developments and M&A. They look at Pillar Two of the OECD tax developments, which provides for a global minimum tax on large corporations, its impact on multinationals, and especially on M&A.

Published on 15 May 2023
Devon Bodoh, Weil Gotshal & Manges LLP, Chambers EF contributor
Devon M Bodoh
Ranked in 1 practice area in Chambers USA Guide
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Jenny Doak, Weil Gotshal & Manges LLP, Chambers EF contributor
Jenny Doak
Ranked in 1 practice area in Chambers Global Guide 2023
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Origins of Pillar Two of the OECD Tax Developments

Pillar Two's origins date back to 2013, when the OECD carried out its work on base erosion and profit shifting (BEPS), looking at how international tax rules could be reformed in light of consensus that they were no longer fit for purpose in the modern global economy. One of the many action points resulted in an agreement by 138 countries on an inclusive framework incorporating two pillars. Pillar One (which is still a work in progress) looked at where tax should be paid and the allocation of profits between jurisdictions. Pillar Two, which is more advanced, proposed a system where multinationals pay a certain minimum level of tax at a rate of 15%.

The OECD's proposals culminated in the model rules being published in December 2021, together with an implementation framework in December 2022, which is not yet mandatory for those corporations agreeing to the proposal.

How Does Pillar Two Work?

The Pillar Two proposal imposes a minimum 15% tax rate on multinationals in a bid to prevent a so-called “race to the bottom”, with jurisdictions attracting multinationals with low corporate tax rates and end the artificial diversion of profits by multinationals to low-tax territories.

The mechanism to enact this is a top-up tax on groups with an effective tax rate below the threshold. The OECD’s proposals are complex and lengthy, with key points to note around scope, methodology and mechanics being discussed by Jenny, and two examples being examined by Devon, in instances of disconnect where there is staggered implementation by different entities in acquisition or joint-venture situations.


The US has implemented its own a minimum-tax regime (GILTI) and a CFC regime. As entities from various jurisdictions interact with the US, there will not be a match per se with the Pillar Two OECD developments. On the other hand, the UK and EU have been early adopters of Pillar Two, with implementation envisaged in 2023 and 2024 respectively. Devon and Jenny further examine the challenges Pillar Two presents, the impact on M&A transactions and potential competitive advantages for private equity funds.

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