Global Minimum Corporate Tax for Multinationals

Minimum Tax Directive enters into force

Wojciech Gadzala | Published on 14 Feb 2023

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On the 23rd December 2022, Council Directive (EU) 2022/2523 of the 14th of December 2022 entered into force.  The Global Minimum Tax Directive’s aim is to ensure a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union. Following months of heated political negotiations, the final text of the Minimum Tax Directive for multinationals introduces into the EU legal order a set of rules based on the OECD Pillar Two global agreement to impose a global 15% minimum tax on the largest multinational businesses. 

The EU minimum tax will apply to multinational enterprise groups and large-scale domestic groups in the EU with consolidated revenues of more than €750 million a year. As a primary mechanism, the Minimum Tax Directive requires an ultimate parent entity of a multinational group to apply a top-up tax to the level of 15% in respect of its all low-taxed group entities, under a mechanism called ‘Income Inclusion Rule'. As a backstop to the IIR, in certain scenarios where they top-up tax cannot be effectively collected under IIR, group entities should apply the ‘Undertaxed Payments Rule' which allocates the remaining, uncollected top-up tax between Member States. Furthermore, the Directive provides the option for Member States to implement a qualified domestic top-up tax, which allows to collect top-up tax locally.

Member States must transpose the rules into domestic law by the 31st of December 2023. The IIR will become effective on or after the 31st of December 2023 and the UTPR on or after the 31st of December 2024.

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