Pillar One
Also called: Amount A · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Beyond NCERT
Meaning
Pillar One is part of the OECD/G20 Two-Pillar Solution, agreed in October 2021 by about 136+ jurisdictions. Its aim is to let market countries, where a firm's users and customers are, tax part of the profits of the largest multinationals, even when the firm has no office there. It covers groups with over €20 billion in revenue and a profit margin above 10%. Under Amount A, 25% of residual profit (profit above the 10% margin) is reallocated to market countries. The multilateral convention needed to put it into effect has stalled.
Example
Suppose a global tech giant earns large profits from Indian users but is based abroad. Under Pillar One, India would get the right to tax part of the profit above the 10% margin. This would replace unilateral levies such as India's equalisation levy, which was abolished in 2024-25.
Don't confuse with
- Pillar Two: a 15% global minimum effective tax rate for groups with €750 million+ revenue. It sets a floor on tax, while Pillar One reallocates taxing rights.
Related concepts
- Tax haven
- Transfer pricing
- Double Taxation Avoidance Agreement
- Retrospective taxation
- Base Erosion and Profit Shifting
- Significant economic presence
- Equalisation levy
- Global minimum tax
- Automatic exchange of information