Commission presents proposal on a global minimum corporate tax rate

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On 22 December, the European Commission presented the legislative proposal on introducing a global minimum corporate tax rate, which follows the two-pillar approach agreed at the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

The proposal aims to implement Pillar Two of the global tax deal by setting out how the effective tax rate will be calculated per jurisdiction, and by introducing rules that will ensure large groups in the EU pay a 15% minimum rate for every jurisdiction in which they operate. If the minimum rate is not imposed by the country where a company is based, the Member State of the parent company may apply a “top-up” tax. The new rules would apply to multinational enterprises (MNEs), both domestic and international, with combined financial revenues of more than €750 million a year, and with either a parent company or a subsidiary situated in a Member State. The proposal also includes certain exceptions, in line with the OECD/G20 agreement.

The Economic and Financial Affairs Council (ECOFIN) will likely discuss the proposal on 18 January 2022 and an agreement might still be expected in the first half of 2022. As the proposal is a taxation file, the Council would have to agree unanimously on the proposal. However, as EU members have already supported the proposal at the global level, that is not expected to be an issue. The Parliament and the European Economic and Social Committee will also need to be consulted and give their opinion.

You can find some further information on the proposal here:

The current proposal is one part of the global two-pillar approach. The other work stream (known as Pillar One) focuses on the partial re-allocation of taxing rights, adapting international rules on how the taxation of corporate profits is shared amongst countries, to reflect the rapid development of digital business models. On Pillar One, a multilateral convention would likely be signed in June 2022 and the ratification is planned before the end of 2022. Following the agreement, the Commission will also present a proposal on its implementation. Reportedly, the Commission is looking at dropping the proposal for the EU digital levy and, instead, aims to generate revenues from the reallocation of taxing rights foreseen under the Pillar One reforms. Additionally, before the end of 2023, the Commission intends to publish a new framework for business taxation in the EU.

Read Ecommerce Europe’s position on the EU digital levy here.

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