CFE Tax Advisers Europe has published an Opinion Statement calling for a temporary pause in the application of the extra-territorial rules under the EU Minimum Tax Directive—specifically the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR)—on the basis of Article 32 of the Directive.
Executive Summary
- Global implementation of Pillar Two has stalled, with key trading partners such as the US, China and India yet to adopt the measures.
- EU groups face a competitiveness disadvantage, being disproportionately subject to IIR and UTPR compared to non-EU counterparts.
- A temporary pause via Article 32 would reduce the IIR and UTPR rates to 0% for a defined period, pending a coordinated international solution.
- Existing domestic minimum taxes (QDMTTs) would still secure the 15% floor, preserving the integrity of the EU regime.
- CFE urges the European Commission and Council to adopt this approach as a matter of legal feasibility and economic necessity.
Opinion
CFE Tax Advisers Europe has submitted this Opinion Statement to EU institutions to highlight concerns regarding the current asymmetry in the implementation of the OECD Pillar Two global minimum tax rules. While the EU has enacted the IIR and UTPR rules, other major economies have yet to follow suit. This has created an uneven playing field, where EU-based multinational groups are subject to higher effective tax rates and greater compliance costs than their competitors in non-EU jurisdictions.
The Opinion Statement argues that the resulting disparity undermines both competitiveness within the EU and the broader policy intent of the Pillar Two framework. In particular, companies headquartered in the EU must comply with overlapping IIR, UTPR and QDMTT rules, while rivals from non-implementing jurisdictions are not similarly burdened. This raises the risk of retaliatory trade measures and creates compliance complexity.
CFE does not view proposals for permanent exemptions or GILTI equivalence as being an adequate solution. These would entrench rather than correct the imbalance. Instead, the Opinion recommends a temporary suspension of IIR and UTPR under Article 32 of the Directive. This pause would allow time for multilateral negotiations with key jurisdictions—particularly the US—and enable EU institutions to recalibrate the system in a technically sound and administratively viable manner.
The statement concludes by calling on the European Commission to initiate, and the Council to adopt, a decision temporarily setting the IIR and UTPR rates to zero. We commend the EU’s leadership in being the first major jurisdiction to implement Pillar Two and support the implementation. The proposed pause is not a retreat – it is a legally feasible, economically necessary step to preserve the integrity of the global minimum tax while avoiding long-term harm to EU taxpayers. During this period, stakeholders—including tax advisers and business representatives—should be engaged in developing a globally aligned, sustainable minimum tax system. The pause is positioned as a necessary step to protect competitiveness, prevent conflict, and preserve the integrity of the EU’s leadership in international tax reform.
We invite you to read the full statement and remain available for any queries concerning the statement.