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July 16, 2026

The Tax Implications of Europe’s Transition to a Dual-Use Industrial Base: Transfer Pricing, International Taxation and The Pillar Two Challenge – Part I

Key Points

This article examines the tax implications of Europe's transition to a dual-use industrial base.
Analysis of the dual-use industrial base framework in Europe
Discussion on the OECD/G20 Pillar Two interactions
Evaluation of international tax pressures from cross-border supply chains
Identifies new pressures on international tax frameworks due to competitiveness and defence strategies.
Highlights implications for transfer pricing in dual-use contexts.
Considers potential impacts of the Pillar Two minimum tax on defence-related industries.

Abstract

This first article of a two-part contribution examines how Europe’s shift toward a dual-use industrial base – intended to strengthen both competitiveness and defence readiness – creates new pressure on the international tax framework. It highlights the implications for transfer pricing and cross-border supply chains and considers how the OECD/G20 Pillar Two minimum tax may interact with defence-driven industrial integration.

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