In a recent European Taxation article, Baker McKenzie Partner Diogo Duarte de Oliveira and Counsel Miguel Pinto de Almeida examine how the Pillar Two rules may apply in the context of mergers and acquisitions (M&A) and reorganizations and look at selected aspects that Luxembourg market players should consider when contemplating such transactions.
The article explores how Pillar Two, which introduced a global minimum effective tax rate of 15% for large multinational groups, has reshaped the tax considerations in transactional contexts. It highlights how acquisitions, disposals and internal reorganizations can significantly affect a group’s tax position, including triggering top-up taxes or bringing companies into scope of the regime.
Diogo and Miguel discuss key practical implications for businesses, noting that transactions which are tax-neutral or routine from a domestic corporate income tax perspective may still produce different outcomes under Pillar Two. They emphasize the importance of careful due diligence, as even groups operating in high-tax jurisdictions may face unexpected exposures due to the interaction of the rules with transaction mechanics.
The authors also examine how specific elements such as asset transfers, intra-group financing arrangements, and pre-implementation restructurings may create mismatches or impact effective tax rates. In addition, they highlight the role of transitional and permanent safe harbors in potentially reducing compliance burden and mitigating risks, while stressing that these mechanisms require detailed analysis and do not eliminate the need for transaction-specific planning.
Drawing on these insights, the article underscores that Pillar Two considerations now extend across the full lifecycle of transactions, from structuring and due diligence to documentation (including contractual protections) and post-closing integration.
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