Commission: New rules to ensure a minimum tax of 15% on the international activities of multinational groups

New rules to ensure a minimum real tax rate of 15% for the global activities of large multinational groups were proposed today by the European Commission.

The new rules respond to the EU’s commitment to move forward quickly and be among the first to implement the recent historic global tax reform agreement (out of 137 countries). The new directive proposed by the Commission contains a common set of rules for calculating this effective tax rate so that it can be applied correctly and consistently across the EU.

In particular, the proposed rules will apply to any large group, domestic and international, with a parent or subsidiary established in an EU Member State. by which the parent company of the parent company applies an additional tax. In addition, effective taxation is ensured in cases where the parent company is outside the EU, in a low tax country that does not apply equivalent rules.

Under the global agreement, the proposal also provides for some exceptions. To reduce the impact on groups that have a real economic activity, 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 the possibility of excluding minimum amounts of profit in order to reduce the burden of compliance in low-risk situations. This means that when the average profit and income of a multinational group in a jurisdiction is below certain thresholds, then this income is not taken into account in calculating the rate.

Economy Commissioner Paolo Gentiloni said: “In October this year, 137 countries supported a historic multilateral agreement to transform the global corporate taxation while addressing long-standing injustices while maintaining competitiveness. Just two months later, we are taking the first step towards The proposed directive will ensure that the new minimum real tax rate of 15% for large companies is implemented in a way that is fully compliant with EU law. follow a second directive next summer to implement the other pillar of the tax redistribution agreement, once the relevant multilateral agreement is signed. ”

Minimum corporate taxation is one of the two pillars of the global agreement – the other is the partial redistribution of tax rights (pillar 1). Based on this, the international rules on how to share the corporate profit taxation of the largest and most profitable multinational companies between countries will be adapted to reflect the changing nature of business models and the ability of companies to operate without a physical presence.

In 2022, the Commission will present a proposal for the redistribution of tax rights, once the technical aspects of the multilateral agreement have been agreed.

By the end of 2023, the Commission will publish a new framework for corporate taxation in the EU, which will reduce the administrative burden for businesses operating in all Member States, remove tax barriers and create a more environment business friendly in the single market.

SOURCE: AMPE