The Treatment of Tax Incentives under Pillar Two

This paper analyses the potential impact of the minimum tax envisaged under
the OECD Pillar Two on several common corporate tax incentives. It reaches the
conclusion that while the impact is expected to be low to moderate for some
common incentives, such as participation exemption regimes and accelerated
depreciations, it might be significant for direct cuts from the tax bill, which include
tax holidays, intellectual property (IP) box regimes and special economic zones
(SEZs). Hence, the response by policymakers must be informed by the specific
interaction between the corporate tax incentives under their respective systems
and the upcoming international standards on the minimum level of taxation.