The Luxembourg government published a revised draft law on 31 October 2024 amending the Global Minimum Taxation Law, commonly referred to as the Pillar Two law.  This revised draft introduces additional amendments to the initial draft published on 12 June 2024, incorporating guidance and clarifications from the OECD’s June 2024 Administrative Guidance.

The guidance focuses on securitisation entities (SEs), clarifying that the obligation for top-up tax concerning a SE would be distributed among other constituent entities situated within the jurisdiction that do not qualify as SEs; SEs may be exempted from the provisions of the Qualified Domestic Minimum Top-up Tax (QDMTT); or SEs could continue to fall under the QDMTT framework and be liable for the top-up tax in accordance with the regulations established by Pillar Two without any modifications.

The revised draft law also clarifies deferred tax liability recapture, divergences between GloBE and accounting carrying values, and the allocation of cross-border current taxes, deferred taxes, and profits in structures involving flow-through entities.

Earlier, the Luxembourg Government Council approved a draft law to amend the Law of 22 December 2023 on 5 June, 2024. It introduced the Pillar Two income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) in alignment with the Council Directive (EU) 2022/2523 from 14 December, 2022.

The legislation concerns the effective minimum taxation for multinational enterprise groups and large national groups.

Having introduced a minimum effective tax floor of 15% for enterprise groups exceeding a consolidated turnover of EUR 750,000,000 into Luxembourg law, the Pillar Two Law is notably based on the agreement reached in October 2021 within the OECD Inclusive Framework on the effective minimum taxation of multinational enterprise groups.