1. US-parented MNEs no longer expected to be subject to Pillar Two (P2) as a result of G7 Agreement on P2:

An agreement was reached within the G7 framework on the application of the OECD P2 rules to US-parented MNEs. The G7 published a statement that outlines the guiding principles of that agreement. Most notably, it includes an announced full exclusion for US-parented MNEs from the Undertaxed Profits Rule (UTPR) and Income Inclusion Rule. This provides welcome relief for US-parented MNEs as it is expected to result in a substantial reduction of their P2 burden. The upcoming Snippet on this topic will address open questions and attention points in relation to the agreement.

2. Belgian Constitutional Court issues positive judgement in case challenging validity of the UTPR:

The Belgian Constitutional Court (Court) issued a pivotal judgment on the Belgian implementation of the UTPR under the EU’s P2 Directive. The Court referred preliminary questions to the Court of Justice of the EU (CJEU), asking whether the UTPR conflicts with EU primary law, including the right to property. CJEU’s decision is pending. As the CJEU’s decisions are binding for the whole EU, the CJEU’s decision on the UTPR could have wider repercussions for the future of the UTPR and the P2 system in the whole EU. The upcoming Snippet on this topic will provide background on the case and its potential impact on US MNEs.

3. EU Council announces negotiations on EU Unshell Directive are discontinued:

In our prior Snippet we described the proposed EU Unshell Directive (ATAD3), which seeks to combat holding companies with inadequate substance that are used to avoid (withholding) taxes. After more than three years of negotiations, the EU Council has recently formally announced the end of the efforts to adopt ATAD3. Instead, the Council aims to achieve the goals of ATAD3 through an amendment of the existing EU Mandatory Disclosure Rules (DAC6). Given that the uncertainty surrounding ATAD3 has been ongoing for more than three years, it is a positive development as there is now some more certainty on ATAD3’s future. The upcoming Snippet on this topic will discuss what the withdrawal of ATAD3 means for US MNEs and US asset managers that have EU holding companies.

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