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Council Directive (EU) 2022/2523 of 15 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Pillar Two Directive)RecitalsChapter I General Provisions (arts. 1-4)Article 1 Subject-matterArticle 2 ScopeArticle 3 DefinitionsArticle 4 Location of a constituent entityChapter II IIR and UTPR (arts. 5-14)Article 5 Ultimate parent entity in the UnionArticle 6 Intermediate parent entity in the UnionArticle 7 Intermediate parent entity located in the Union and held by an excluded ultimate parent entityArticle 8 Partially-owned parent entity in the UnionArticle 9 Allocation of the top-up tax under the IIRArticle 10 IIR offset mechanismArticle 11 Election to apply a qualified domestic top-up taxArticle 12 Application of a UTPR across the MNE groupArticle 13 Application of the UTPR in the jurisdiction of an ultimate parent entityArticle 14 Computation and allocation of the UTPR top-up tax amountChapter III Computation of the qualifying income or loss (arts. 15-19)Article 15 Determination of the qualifying income or lossArticle 16 Adjustments to determine the qualifying income or lossArticle 17 International shipping income exclusionArticle 18 Allocation of the qualifying income or loss between a main entity and a permanent establishmentArticle 19 Allocation of the qualifying income or loss of a flow-through entityChapter IV Computation of adjusted covered taxes  (arts. 20-25)Article 20 Covered taxesArticle 21 Adjusted covered taxesArticle 22 Total deferred tax adjustment amountArticle 23 Qualifying loss electionArticle 24 Specific allocation of covered taxes incurred by certain types of constituent entitiesArticle 25 Post-filing adjustments and tax rate changesChapter V Computation of the effective tax rate and the top-up tax (arts. 26-32)Article 26 Determination of the effective tax rateArticle 27 Computation of the top-up taxArticle 28 Substance-based income exclusionArticle 29 Additional top-up taxArticle 30 De minimis exclusionArticle 31 Minority-owned constituent entitiesArticle 32 Safe harboursChapter VI Special Rules for Corporate Restructuring and Holding Structures (arts. 33-37)Article 33 Application of the consolidated revenue threshold to group mergers and demergersArticle 34 Constituent entities joining and leaving an MNE group or a large-scale domestic groupArticle 35 Transfer of assets and liabilitiesArticle 36 Joint venturesArticle 37 Multi-parented MNE groupsChapter VII Tax Neutrality and Distribution Regimes (arts. 38-43)Article 38 Ultimate parent entity that is a flow-through entityArticle 39 Ultimate parent entity subject to a deductible dividend regimeArticle 40 Eligible distribution tax systemsArticle 41 Determination of the effective tax rate and top-up tax of an investment entityArticle 42 Election to treat an investment entity as a tax transparent entityArticle 43 Election to apply a taxable distribution methodChapter VIII Administrative Provisions (arts. 44-46)Article 44 Filing obligationsArticle 45 ElectionsArticle 46 PenaltiesChapter IX Transition Rules (arts. 47-51)Article 47 Tax treatment of deferred tax assets, deferred tax liabilities and transferred assets upon transitionArticle 48 Transitional relief for the substance-based income exclusionArticle 49 Initial phase of exclusion from the IIR and UTPR of MNE groups and large-scale domestic groupsArticle 50 Election for a delayed application of the IIR and UTPRArticle 51 Transitional relief for filing obligationsChapter X Final Provisions (arts. 52-59)Article 52 Assessment of equivalenceArticle 53 Exercise of the delegationArticle 54 Informing the European ParliamentArticle 55 Bilateral agreement on simplified reporting obligationsArticle 56 TranspositionArticle 57 Review by the Commission of the implementation of Pillar OneArticle 58 Entry into forceArticle 59 AddresseesDone at
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AI Summary of Article 13 Application of the UTPR in the jurisdiction of an ultimate parent entity

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Version status: Entered into force | Document consolidation status: Updated to reflect all known changes
Version date: 23 December 2022 - onwards
Version 2 of 2

Article 13 Application of the UTPR in the jurisdiction of an ultimate parent entity

1. Where the ultimate parent entity of an MNE group is located in a low-tax third country jurisdiction, Member States shall ensure that the constituent entities located in the Union are subject, in the Member State in which they are located, to an adjustment equal to the UTPR top-up tax amount allocated to that Member State for the fiscal year in accordance with Article 14.

For that purpose, such adjustment may take the form of either a top-up tax due by those constituent entities or a denial of deduction against the taxable income of those constituent entities resulting in an amount of tax liability necessary to collect the UTPR top-up tax amount allocated to that Member State.

The first subparagraph shall not apply where the ultimate parent entity in a low-tax third-country jurisdiction is subject to a qualified IIR in respect of itself and its low-taxed constituent entities located in that jurisdiction.

2. Where a Member State applies the adjustment pursuant to paragraph 1 of this Article in the form of a denial of deduction against taxable income, such adjustment shall apply to the extent possible with respect to the taxable year in which the fiscal year for which the UTPR top-up tax amount was computed and allocated to a Member State in accordance with Article 14 ends.

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