Not Taxed, But Affected – Does the POPE Rule in the Pillar 2 Directive Restrict the Free Movement of Capital for Cross-Border Minority Owners?
(2026) HARN60 20261Department of Business Law
- Abstract
- This thesis examines whether the partially owned parent entity (POPE) rule in the Directive (EU) 2022/2523 (P2D) creates a restriction on the free movement of capital under Article 63 TFEU, and if so, whether that restriction be justified and regarded as proportionate under EU law.
The POPE rule forms part of the EU implementation of Pillar Two, which aims to
ensure a global minimum level of taxation for large multinational groups. Under
Article 8 P2D, a POPE located in the EU may be required to pay income inclusion rule top-up tax where part of its ownership interests are held by persons outside the group. The thesis uses a legal dogmatic method and analyses the P2D in light of EU primary law, mainly Article 63 TFEU and the case law... (More) - This thesis examines whether the partially owned parent entity (POPE) rule in the Directive (EU) 2022/2523 (P2D) creates a restriction on the free movement of capital under Article 63 TFEU, and if so, whether that restriction be justified and regarded as proportionate under EU law.
The POPE rule forms part of the EU implementation of Pillar Two, which aims to
ensure a global minimum level of taxation for large multinational groups. Under
Article 8 P2D, a POPE located in the EU may be required to pay income inclusion rule top-up tax where part of its ownership interests are held by persons outside the group. The thesis uses a legal dogmatic method and analyses the P2D in light of EU primary law, mainly Article 63 TFEU and the case law of the CJEU on restrictions, justification and proportionality.
The thesis concludes that the POPE rule may create a restriction on the free movement of capital. Although the rule is triggered by outside ownership rather than residence, outside minority shareholders may still be economically affected when the POPE pays top-up tax, for example through lower dividends or reduced share value.
The thesis further concludes that such a restriction can be justified in principle. The strongest justification is the balanced allocation of taxing rights within the Pillar Two system. The POPE rule is likely suitable, but its necessity and strict proportionality are less clear, especially where outside minority shareholders are not taxed directly but still be economically affected by the rule. Overall, the rule would probably be regarded as proportionate if the CJEU gives weight to the EU legislator’s broad discretion, but it is less clearly proportionate if greater weight is given to the position of outside minority shareholders. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/student-papers/record/9233659
- author
- Svantesson, Anna-Johanna LU
- supervisor
- organization
- course
- HARN60 20261
- year
- 2026
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Tax Law, Pillar Two Directive, Partially Owned Parent Entity, Income Inclusion Rule, Free Movement of Capital, Cross-Border Minority Investment, Restriction, Proportionality
- language
- English
- id
- 9233659
- date added to LUP
- 2026-06-09 11:16:23
- date last changed
- 2026-06-09 11:16:23
@misc{9233659,
abstract = {{This thesis examines whether the partially owned parent entity (POPE) rule in the Directive (EU) 2022/2523 (P2D) creates a restriction on the free movement of capital under Article 63 TFEU, and if so, whether that restriction be justified and regarded as proportionate under EU law.
The POPE rule forms part of the EU implementation of Pillar Two, which aims to
ensure a global minimum level of taxation for large multinational groups. Under
Article 8 P2D, a POPE located in the EU may be required to pay income inclusion rule top-up tax where part of its ownership interests are held by persons outside the group. The thesis uses a legal dogmatic method and analyses the P2D in light of EU primary law, mainly Article 63 TFEU and the case law of the CJEU on restrictions, justification and proportionality.
The thesis concludes that the POPE rule may create a restriction on the free movement of capital. Although the rule is triggered by outside ownership rather than residence, outside minority shareholders may still be economically affected when the POPE pays top-up tax, for example through lower dividends or reduced share value.
The thesis further concludes that such a restriction can be justified in principle. The strongest justification is the balanced allocation of taxing rights within the Pillar Two system. The POPE rule is likely suitable, but its necessity and strict proportionality are less clear, especially where outside minority shareholders are not taxed directly but still be economically affected by the rule. Overall, the rule would probably be regarded as proportionate if the CJEU gives weight to the EU legislator’s broad discretion, but it is less clearly proportionate if greater weight is given to the position of outside minority shareholders.}},
author = {{Svantesson, Anna-Johanna}},
language = {{eng}},
note = {{Student Paper}},
title = {{Not Taxed, But Affected – Does the POPE Rule in the Pillar 2 Directive Restrict the Free Movement of Capital for Cross-Border Minority Owners?}},
year = {{2026}},
}