The Proposed R&D Allowance in the Omnibus Package: A Pillar Two Perspective

This note provides an assessment of the European Commission’s proposed R&D allowance in the Direct Tax Omnibus Package. It places the proposal in the context of the Commission’s earlier corporate tax initiatives, examines the uncertainty surrounding its design and analyses its interaction with the Pillar Two rules. The note argues that the proposed allowance raises important interpretative and implementation issues and considers whether a qualified refundable tax credit could offer a more effective alternative.