EU adopts global minimum tax of 15% on corporates:
- European Union (EU) member states achieved a historic breakthrough, by agreeing to implement the OECD’s global corporate minimum tax rate of 15% across the bloc.
- The landmark two-pillar solution, which was reached at the OECD Inclusive Framework by 137 countries in October 2021, represents the most wide-reaching attempt to reduce profit-shifting by global corporations.
- Pillar two aims to ensure that large multinationals with revenues of at least €750 million ($790 million) pay an international minimum effective tax rate of 15% in all the countries in which they operate.
- The EU’s minimum tax rate move is seen as crucial to saving pillar two after the measure had gone cold on both sides of the Atlantic due to fierce political and business resistance.
- European ambassadors have now set the ball rolling on applying the tax floor rate by advising the Council of Ministers to formally adopt the pillar two directive. The EU law is expected to be transposed into member states’ domestic rules by the end of 2023.
- One feature of the Pillar two is that a country that enacts the measure can collect taxes on profits made by companies based in other jurisdictions to ensure the goal of 15% is reached if those other jurisdictions don’t collect the tax themselves. This could let the U.K. tax a U.S. company on some of its profits until the U.S. adopts the minimum tax.
