The German Federal Ministry of Finance issues draft law for the implementation of the EU Directive to ensure a global minimum level of taxation for multinational groups of companies and large domestic groups in the Union The aim of the draft law is to implement key elements of the international agreements on Pillar 2 of the so-called two-pillar solution. The post-taxation provisions contained therein are intended to ensure a global effective minimum taxation, to counteract harmful tax competition and aggressive tax structuring and thus to contribute to the promotion of tax justice and a level playing field. Click here for unofficial English translation ...

12 December 2022 the EU Council announced unanimous agreement among member states on the Commission’s proposal for a Directive ensuring a minimum effective tax rate of 15% for large multinationals with a turnover of at least €750 million. With the agreement, the EU will be among the first to implement Pillar II. The Council Directive includes a common set of rules on how to calculate the 15% effective minimum tax rate– so that this is properly and consistently applied across the EU. The rules will apply to multinational enterprise groups and large-scale domestic groups in the EU, with combined financial revenues of more than €750 million a year. They will apply to any large group, both domestic and international, with a parent company or a subsidiary situated in an EU Member State. If the minimum effective rate is not imposed by the country where the subsidiary company is based, there are provisions for the Member State of the parent company to apply a “top-up” tax. This Directive also ensures effective taxation in situations where the parent company is situated outside the EU in a low-tax country which does not apply equivalent rules ...

France, Germany, Italy, Netherlands and Spain have issued a joint statement to reaffirm their commitment to swiftly implement the global minimum effective corporate taxation (Pillar Two). According to the statement the five countries are also fully committed to to complete the work on the better reallocation of taxing rights from huge global multinationals’ profits (Pillar One) with the objective of signing a multilateral convention by mid-2023 ...

The European Commission has proposed a Directive ensuring a minimum effective tax rate for the global activities of large multinational groups. The proposal delivers on the EU’s pledge to move extremely swiftly and be among the first to implement the recent historic global tax reform agreement, which aims to bring fairness, transparency and stability to the international corporate tax framework. The proposed directive follows closely the international agreement and sets out how the principles of the 15% effective tax rate – agreed by 137 countries – will be applied in practice within the EU. It includes a common set of rules on how to calculate this effective tax rate, so that it is properly and consistently applied across the EU. The proposed rules will apply to any large group, both domestic and international, with a parent company or a subsidiary situated in an EU Member State. If the minimum effective rate is not imposed by the country where a low-taxed company is based, there are provisions for the Member State of the parent company to apply a “top-up” tax. The proposal also ensures effective taxation in situations where the parent company is situated outside the EU in a low-tax country which does not apply equivalent rules. In line with the global agreement, the proposal also provides for certain exceptions. To reduce the impact on groups carrying out real economic activities, companies will be able to exclude an amount of income equal to 5% of the value of tangible assets and 5% of payroll. The rules also provide for an exclusion of minimal amounts of profit, to reduce the compliance burden in low risk situations. This means that when the average profit and revenues of a multinational group in a jurisdiction are below certain minimum thresholds, then that income is not taken into account in the calculation of the rate. Background Minimum corporate taxation is one of the two work streams of the global agreement – the other is the partial re-allocation of taxing rights (known as Pillar 1). This will adapt the international rules on how the taxation of corporate profits of the largest and most profitable multinationals is shared amongst countries, to reflect the changing nature of business models and the ability of companies to do business without a physical presence. The Commission will also make a proposal on the reallocation of taxing rights in 2022, once the technical aspects of the multilateral convention are agreed ...

The European Commission has proposed a Directive ensuring a minimum effective tax rate for the global activities of large multinational groups. The proposal delivers on the EU’s pledge to move extremely swiftly and be among the first to implement the recent historic global tax reform agreement, which aims to bring fairness, transparency and stability to the international corporate tax framework. The proposed directive follows closely the international agreement and sets out how the principles of the 15% effective tax rate – agreed by 137 countries – will be applied in practice within the EU. It includes a common set of rules on how to calculate this effective tax rate, so that it is properly and consistently applied across the EU. The proposed rules will apply to any large group, both domestic and international, with a parent company or a subsidiary situated in an EU Member State. If the minimum effective rate is not imposed by the country where a low-taxed company is based, there are provisions for the Member State of the parent company to apply a “top-up” tax. The proposal also ensures effective taxation in situations where the parent company is situated outside the EU in a low-tax country which does not apply equivalent rules. In line with the global agreement, the proposal also provides for certain exceptions. To reduce the impact on groups carrying out real economic activities, companies will be able to exclude an amount of income equal to 5% of the value of tangible assets and 5% of payroll. The rules also provide for an exclusion of minimal amounts of profit, to reduce the compliance burden in low risk situations. This means that when the average profit and revenues of a multinational group in a jurisdiction are below certain minimum thresholds, then that income is not taken into account in the calculation of the rate. Background Minimum corporate taxation is one of the two work streams of the global agreement – the other is the partial re-allocation of taxing rights (known as Pillar 1). This will adapt the international rules on how the taxation of corporate profits of the largest and most profitable multinationals is shared amongst countries, to reflect the changing nature of business models and the ability of companies to do business without a physical presence. The Commission will also make a proposal on the reallocation of taxing rights in 2022, once the technical aspects of the multilateral convention are agreed ...