Background

The OECD model rules were implemented in the EU through Council Directive (EU) 2022/2523 of 14 December 2022 (Pillar Two Directive). Member States had to transpose the Pillar Two Directive into their national laws before 31 December 2023, so that some of the rules would start applying in fiscal years beginning from 31 December 2023. Some Member States still have not implemented the Pillar Two Directive.

Article 44 of the Pillar Two Directive sets out the filing requirements that constituent entities of groups in scope of that directive must comply with. By default, each constituent entity must file a TTIR in the Member State where it is located. However, there is a derogation to the extent that the group’s ultimate parent entity (UPE) or a designated filing entity files the TTIR on behalf of the entire group. This central filing is allowed as long as two conditions are fulfilled: (1) an agreement to exchange information is in effect between the jurisdiction of the UPE or the entity designated to file the TTIR on behalf of the group and the jurisdiction of the relevant constituent entity, and (2) the UPE or the designed filing entity has indeed made the filing. The DAC9 would enable meeting condition (1) within the EU.

Also, in July 2023, the OECD developed a standardized information return (so-called “GloBE Information Return”, GIR) and explanatory guidance for entities to fulfill their filing obligations under the OECD model rules. The GIR contains the data points that tax administrations need to determine whether and how much top-up tax should be levied, and which entity should pay that top-up tax (if any).

The DAC9 proposal

The DAC9 proposal consists of two parts: (a) amendments to the text of the DAC introducing a framework for the exchange of TTIRs; and (b) a new Annex VII defining the content of the TTIR.

(a) Framework for the exchange of Top-up Tax Information Returns (TTIRs)

The DAC9 proposal would introduce several new articles to the existing DAC, including – among others – the following.

  • A framework for exchanging TTIRs. Member States should take necessary measures to require EU-resident reporting entities of an in-scope group to file the TTIR using the standard template provided for in the new Annex VII of the DAC (see below) within the deadlines provided for in Articles 44(7) and 51 of the Pillar Two Directive (i.e., within 15 months after the last day of the relevant fiscal year, respectively within 18 months for the first fiscal year in which the rules apply to the group in a given jurisdiction). Furthermore, once the TTIR is filed with the Member State, the latter must send (through automatic exchange) the appropriate parts of that report to other relevant Member States in accordance with the "dissemination approach" approved by the OECD/G20 Inclusive Framework to ensure that all relevant jurisdictions only receive the information they need, based on the presence of the in-scope group in their jurisdiction. In addition, the new provision establishes that the relevant parts of the TTIR should be exchanged as soon as possible and, in any case, no later than 3 months (or 6 months, for fiscal year 2024) after the filing deadline for the applicable fiscal year. TTIRs received after the filing deadline should be exchanged as soon as they have been received and, in any case, no later than 3 months after receiving them. Finally, the Commission should adopt through implementing acts the necessary practical arrangements to facilitate the exchange of information.
  • Rules for collaboration on corrections, compliance, and enforcement concerning TTIRs. The proposed provision allows a Member State to enquire about a TTIR that was reported as being filed centrally but has not been exchanged. Under this provision, a Member State could verify if such a report indeed has been filed and enquire about the expected filing date if this has not already been done. If the TTIR has not been received within 3 months of the new expected filing date, local filing requirements may be imposed on the constituent entities of the group, since the conditions for central filing would not be met. However, the provision provides that no local filing may be imposed on the constituent entities before that deadline has passed.

These rules would apply to the relevant calendar year or other appropriate reporting period as from 1 January 2024, i.e., should in general apply from the first year of application of Pillar Two to in-scope groups. However, for Member States that have chosen to defer the entry into force the IIR and the UTPR by six fiscal years, the first year in which the DAC9 would apply shall be the first fiscal year following that election's end.

(b) Addition of Annex VII to the DAC: Filing rules and form for TTIR

The DAC9 proposal would introduce a new Annex VII to the DAC. The first section of that annex provides definitions for specific terms used in the annex and the relevant articles in the DAC. The second section of the annex outlines the filing requirements applicable to the filing entity. The third section of the annex details the data points to be provided and is in line with the GIR developed by the OECD. The DAC9 proposal also states that OECD guidance for filing the GIR could be used as a source of interpretation for MNEs to file the TTIR.

The Commission would be entitled to amend the TTIR through a delegated act to incorporate any future updates agreed upon at the international level.

Implications

The DAC9 proposal introduces a standard form for filing TTIR, which seems to very closely align with the GIR. This EU standardized form should facilitate central filing within the EU, helping in-scope groups to fulfill their filing obligations under the (national implementation of the) Pillar Two Directive with a (slightly) reduced burden, and enabling EU tax authorities to assess and exchange relevant information.

For the exchange of information with third country jurisdictions, Member States will still have to sign appropriate international agreements with those jurisdictions, as required under the Pillar Two Directive. The development of a Multilateral Competent Authority Agreement on the Exchange of GloBE Information Returns to efficiently facilitate such an exchange with third country jurisdictions is currently still ongoing at the OECD level.

Because of the delegation of powers foreseen in the DAC9 proposal, it is expected that any future changes introduced to the form agreed at the OECD level will also be swiftly introduced at the EU level.

Next steps

Once adopted by the EU Council, EU Member States would have until 31 December 2025 to implement the national laws, regulations, and administrative provisions necessary to comply with DAC9. Member States that have elected to delay implementing the Pillar 2 Directive shall do so at the latest the day before the end of that election.

In-scope groups are expected to file their first TTIR by 30 June 2026, as required under the Pillar 2 Directive. The relevant tax authorities would have to exchange appropriate information from the TTIR with each other by 31 December 2026, at the latest.

Should you have any questions in the meantime, please contact a member of our Pillar Two team or your regular trusted contact at Loyens & Loeff.