Tag Archive: Global Minimum Tax

1. Global Minimum Tax Implementation Progresses

   20 April 2025 9:06 am Leave a Comment

   Global Minimum Tax Implementation – Introduction

   The global minimum tax is one of the most significant international tax reforms in decades.

   Spearheaded by the Organisation for Economic Co-operation and Development (OECD), the idea is to ensure that large multinational companies pay a minimum level of tax no matter where they are based.

   This avoids a race to the bottom, where countries compete to offer the lowest corporate tax rates.

   In recent days, momentum has been building as several countries progress towards implementing this tax reform.

   What is the Global Minimum Tax?

   The global minimum tax sets a floor of 15% for corporate taxation.

   It targets companies with annual revenues above €750 million and seeks to prevent profit-shifting to low-tax jurisdictions.

   Under this framework, if a company pays less than 15% tax in one country, other countries can top up the tax to ensure the minimum rate is met.

   Recent Developments

   In the last 24 hours, finance ministries across Europe, Asia, and North America have released updates on their plans to adopt the minimum tax by the 2025 deadline.

   Germany and Japan have already passed legislation. Canada, the UK, and Australia have published consultation papers or draft legislation.

   The European Union previously agreed a directive for member states to adopt the rules.

   There are still some hurdles. For instance, implementation in the United States has been politically contentious.

   However, many countries are pushing forward regardless, recognising the global shift towards fairness and transparency in taxation.

   Why Does It Matter?

   The reform is designed to create a level playing field.

   For years, tech giants and global brands have paid minimal taxes in the countries where they operate, using complex structures and tax havens.

   The global minimum tax could yield billions in additional tax revenue for governments worldwide.

   It also discourages the creation of artificial business structures solely for tax reasons.

   Concerns and Criticisms

   Some critics argue that 15% is still too low and may legitimise tax avoidance rather than stop it.

   Others worry about the compliance burden, especially for companies operating in multiple jurisdictions.

   There are also concerns from smaller, low-tax countries that rely on competitive tax rates to attract investment.

   Global Minimum Tax – Conclusion

   The global minimum tax marks a shift in how we think about corporate taxation.

   It’s no longer just a national issue but a global one.

   While challenges remain, the recent wave of implementation activity shows that change is truly underway.

   Final thoughts

   If you have any queries about this article on global minimum tax, or tax matters in International then please get in touch.

   Alternatively, if you are a tax adviser in International and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

2. Global Tax Reform and Ireland

   8 April 2025 5:10 pm Leave a Comment

   Global Tax Reform and Ireland – Introduction

   Ireland has long been a magnet for multinational companies.

   With its 12.5% corporate tax rate, English-speaking workforce, and EU membership, it became home to the European headquarters of major tech giants like Apple, Google, and Meta.

   But global tax reform – particularly the OECD’s minimum tax initiative – is changing the rules of the game.

   What does this mean for Ireland’s economy and its future as a hub for international business?

   Ireland and the 12.5% Rate

   For over two decades, Ireland’s 12.5% corporation tax rate has been a key pillar of its economic policy.

   It attracted foreign direct investment (FDI), created tens of thousands of jobs, and turned Dublin into a global business centre.

   But critics argued that it also allowed companies to shift profits into Ireland, reducing their global tax bills and depriving other countries of revenue.

   The OECD Global Minimum Tax

   In 2021, over 130 countries – including Ireland – agreed to implement a global minimum corporate tax rate of 15% on large multinational companies (those with global revenues over €750 million).

   This is known as Pillar Two of the OECD’s global tax agreement.

   Ireland initially resisted the change, concerned it would reduce its competitive edge. But after securing a carve-out that allows the rate to remain at 12.5% for smaller companies, Ireland signed up.

   What’s Changing in Ireland?

   From 2024, Ireland will apply the 15% minimum tax to large multinationals operating there.

   This means that even if a company benefits from local incentives or deductions that lower its effective tax rate, a “top-up” tax will apply if the global rate falls below 15%.

   This change is highly significant for Ireland. While the government expects the country to remain attractive – due to its talent, EU access, and stable legal system – some economists warn that the golden era of FDI-driven growth may cool slightly.

   In response, the Irish government is focusing more on long-term, sustainable growth through infrastructure, education, and innovation, rather than relying purely on tax competitiveness.

   What Does This Mean for Businesses?

   For large companies already in Ireland, the tax bill is likely to rise slightly, especially if they were benefiting from preferential structures.

   But for small and medium-sized businesses — including many Irish companies — the 12.5% rate continues to apply.

   That means Ireland still offers one of the most attractive environments for smaller international businesses looking for an EU base.

   Global Tax Reform and Ireland – Conclusion

   Ireland’s place in the global tax landscape is evolving. It remains a strong destination for business, but the days of ultra-low tax planning through Ireland are being replaced by a more level playing field. As the OECD’s global tax framework beds in, Ireland’s future success will depend on more than just its tax rate — and that’s not necessarily a bad thing.

   Final thoughts

   If you have any queries about this article on corporate tax reform, or tax matters in Ireland then please get in touch.

   
   Alternatively, if you are a tax adviser in Ireland and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

3. The Global Minimum Tax Deal Under Pressure – Is the US Holding It Back?

   30 March 2025 4:06 am Leave a Comment

   Global Minimum Tax Deal Under Pressure – Introduction

   Just when the world thought it was on the cusp of a global tax breakthrough, cracks are beginning to show.

   The landmark OECD agreement aimed at overhauling how multinational companies are taxed is facing renewed opposition – and much of the resistance is coming from the United States.

   This could have major implications for how, when, and even if the deal is implemented.

   What Is the Global Tax Deal?

   The OECD’s two-pillar framework was designed to tackle tax avoidance and ensure large multinationals pay a fairer share of tax, wherever they operate.

   Pillar One reallocates taxing rights so market countries can tax a portion of profits.

   Pillar Two introduces a global minimum corporate tax rate of 15% for companies with annual revenues above €750 million.

   Over 135 countries, including the US, have committed in principle. But turning that agreement into domestic law is proving to be the real challenge.

   Why Is the US Wavering?

   Although the Biden administration supported the OECD framework, political realities have changed.

   With a divided Congress and strong Republican opposition, passing necessary legislation has become difficult.

   Critics in the US argue that the global minimum tax could hurt American competitiveness by effectively outsourcing tax sovereignty.

   There’s also concern that other countries are implementing Pillar Two but dragging their feet on Pillar One – potentially putting US firms at a disadvantage.

   Impact on Global Progress

   US hesitancy could derail the entire project.

   Other countries, particularly in the EU and Asia, are moving forward with minimum tax rules.

   If the US doesn’t follow suit, it undermines the whole concept of a level playing field.

   There’s also a risk that disputes over digital taxes, which Pillar One was supposed to resolve, could flare up again if countries lose patience with the OECD timetable.

   What Happens Next?

   All eyes are now on the US Congress and upcoming elections.

   Without US implementation, the deal lacks weight — and countries may return to unilateral measures like digital services taxes.

   This would be a setback for international cooperation and tax certainty.

   Global Minimum Tax Deal – Conclusion

   The global tax deal was a diplomatic achievement, but its future is far from guaranteed.

   If the US backs away or delays indefinitely, other countries may rethink their own commitments — and the dream of a fairer global tax system could stall once more.

   Final thoughts

   If you have any queries about this article on the global minimum tax, or tax matters in the United States then please get in touch.

   Alternatively, if you are a tax adviser in the United States and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

4. Trump Withdraws US from Global Minimum Tax Agreement

   28 January 2025 4:55 am Leave a Comment

   Trump Withdraws US from Global Minimum Tax Agreement – Introduction

   The global tax landscape was thrown into turmoil recently when former US President Donald Trump announced that the United States would withdraw from the OECD-led global minimum tax agreement.

   This ambitious framework, aimed at imposing a 15% minimum tax rate on large multinational corporations, was designed to curb tax avoidance and level the playing field for global businesses.

   Trump’s decision raises concerns about the potential for a new tax war and poses questions about the future of international tax cooperation.

   What Is the Global Minimum Tax Agreement?

   The global minimum tax agreement, championed by the Organisation for Economic Co-operation and Development (OECD), is an initiative to prevent multinational corporations from exploiting low-tax jurisdictions.

   By imposing a baseline tax rate of 15% worldwide, the deal sought to ensure that all companies pay a fair share of taxes, regardless of where they operate.

   Over 140 countries initially supported this agreement, signaling a major step toward global tax fairness.

   Why Did the US Withdraw?

   President Trump cited concerns about the agreement’s impact on American businesses, particularly tech giants like Google and Apple, which generate substantial revenue globally.

   Trump argued that the deal unfairly targeted US firms while benefiting foreign competitors.

   Additionally, he expressed opposition to the agreement’s provision that would allow other nations to tax profits earned within their borders.

   This decision has left allies like the EU, Japan, and Canada frustrated, as they had anticipated US leadership in implementing the deal.

   Without the participation of the world’s largest economy, the agreement’s effectiveness is now under scrutiny.

   What Happens Next?

   The withdrawal raises the risk of retaliatory tax measures between countries.

   For example, the EU and the UK have already implemented or proposed digital services taxes that disproportionately affect US-based companies.

   In response, Trump hinted at doubling taxes on foreign nationals and companies operating in the United States. Such moves could escalate into a full-blown tax war, disrupting global trade and economic stability.

   On the other hand, countries like Ireland and Switzerland, known for their low corporate tax rates, may continue to attract multinational corporations looking to minimise their tax burdens.

   This could further fragment the global tax landscape and create competition among jurisdictions.

   Trump Withdraws US from Global Minimum Tax Agreement – Conclusion

   The US withdrawal from the global minimum tax deal marks a significant setback for international tax reform.

   Without US participation, the agreement’s implementation faces serious hurdles, and the likelihood of unilateral tax measures increases.

   While some countries are committed to moving forward, the absence of a global consensus could lead to fragmented policies and heightened tensions.

   Final Thoughts

   If you have any queries about this article on the global minimum tax, or tax matters in the United States, then please get in touch.

   Alternatively, if you are a tax adviser in the United States and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

5. Thailand Approves Global Minimum Corporate Tax

   9 December 2024 5:01 am Leave a Comment

   Thailand Global Minimum Tax – Introduction

   Thailand has taken steps to align itself with global tax standards by approving a draft law to implement a 15% global minimum corporate tax.

   This measure targets multinational corporations with annual global revenues exceeding €750 million, aiming to ensure fairer taxation and reduce profit-shifting to low-tax jurisdictions.

   The Global Minimum Tax: What It Means

   The global minimum tax is part of a broader effort spearheaded by the OECD to address base erosion and profit shifting (BEPS).

   The aim is to ensure that large multinational enterprises (MNEs) pay a minimum level of tax regardless of where they operate. By implementing this measure, Thailand seeks to:

   • Level the playing field for domestic businesses.
   • Prevent large MNEs from exploiting low-tax jurisdictions.
   • Boost domestic revenue collection to fund infrastructure and social programs.

   Thailand’s Position in the Global Tax Reform

   Thailand’s adoption of the 15% minimum tax reflects its commitment to global economic cooperation.

   The reform aligns the country with over 140 jurisdictions that have pledged to implement the OECD’s tax framework.

   Potential Implications

   While the reform is seen as a progressive step, it raises questions about its impact on Thailand’s investment attractiveness. Key considerations include:

   • Increased Tax Revenue: Thailand anticipates higher tax collections from MNEs.
   • Investment Decisions: Foreign investors may reassess Thailand’s competitiveness compared to jurisdictions with more favorable tax regimes.
   • Administrative Challenges: Implementing and enforcing the minimum tax will require significant resources and expertise.

   Thailand Global Minimum Tax – Conclusion

   Thailand’s approval of the global minimum corporate tax signals its dedication to modernizing its tax system and fostering international cooperation.

   However, the measure’s success will depend on effective implementation and balancing revenue generation with maintaining investment appeal.

   Final Thoughts

   If you have any queries about this article on the global minimum tax, or tax matters in Thailand, then please get in touch.

   Alternatively, if you are a tax adviser in Thailand and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

6. OECD Releases Global Minimum Tax Guidelines

   25 November 2024 7:15 pm Leave a Comment

   OECD’s global minimum tax guidelines – Introduction

   The OECD has published new technical guidelines to assist countries in implementing the global minimum corporate tax rate of 15%.

   This initiative aims to ensure that multinational corporations contribute a fair share of taxes, regardless of where they operate.

   Key Features of the Guidelines

   The technical guidance addresses several challenges, including calculating effective tax rates, identifying low-tax jurisdictions, and handling cross-border complexities.

   It also provides a framework for dispute resolution between nations.

   Implications for Multinational Corporations

   The guidelines will require multinationals to reassess their tax strategies, particularly those involving low-tax jurisdictions.

   Compliance costs are expected to rise, but the rules aim to create a more level playing field globally.

   Challenges in Implementation

   Countries with tax-friendly regimes may resist adopting these guidelines, fearing a loss of competitiveness.

   Additionally, differing interpretations of the rules could lead to disputes between jurisdictions.

   OECD’s global minimum tax guidelines – Conclusion

   The OECD’s technical guidance is a significant step towards implementing a global minimum tax. While challenges remain, this initiative represents a milestone in international tax cooperation.

   Final Thoughts

   If you have any queries about this article on OECD’s global minimum tax guidelines, or tax matters in OECD member states, then please get in touch.

   Alternatively, if you are a tax adviser in OECD member states and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

7. Gibraltar Considers Corporate Tax Rate Increase

   8 September 2024 6:37 am Leave a Comment

   Gibraltar Considers Corporate Tax Rate Increase – Introduction

   Corporate tax is the tax paid by businesses on their profits. Some countries, like Gibraltar, have relatively low corporate tax rates to attract companies to set up operations there.

   However, due to international tax changes, Gibraltar is considering increasing its corporate tax rate to remain compliant with global standards.

   Why is Gibraltar Considering an Increase?

   Gibraltar’s current corporate tax rate is 12.5%, one of the lowest in the world. Many businesses choose Gibraltar because of this attractive tax environment.

   However, the introduction of the OECD’s Pillar 2 global minimum tax—set at 15%—means Gibraltar might have to raise its tax rate to align with this international rule.

   The global minimum tax is designed to prevent companies from shifting profits to low-tax countries to avoid paying taxes.

   Countries with tax rates lower than 15% may have to increase them, or other countries where companies operate can “top up” the tax to meet the 15% threshold.

   What This Means for Gibraltar

   If Gibraltar increases its tax rate, it could still remain competitive compared to other countries, but businesses might have to adjust their tax planning strategies.

   Some companies that rely on Gibraltar’s low tax rate might look for other tax-friendly jurisdictions.

   On the other hand, by complying with the global minimum tax, Gibraltar will improve its reputation as a transparent and cooperative tax jurisdiction, which could attract more responsible businesses.

   Potential Impacts on Businesses

   Companies currently benefiting from Gibraltar’s low corporate tax rate will need to evaluate how the increase will affect their profits.

   They may have to pay higher taxes if the rate rises to 15%.

   However, many businesses may find that Gibraltar remains an attractive place to operate, especially because of its other benefits, like a favourable regulatory environment and access to European markets.

   Gibraltar Considers Corporate Tax Rate Increase – Conclusion

   Gibraltar’s potential corporate tax rate increase is part of a global shift towards greater tax transparency and cooperation.

   While businesses may need to adjust to the new rate, Gibraltar’s continued compliance with international standards will likely strengthen its position in the global economy.

   Final thoughts

   If you have any queries about this article on Gibraltar Considers Corporate Tax Rate Increase, or tax matters in Gibraltar more generally, then please get in touch.

8. New minimum tax law in Germany

   5 March 2024 9:45 am Leave a Comment

   New Minimum tax law in Germany – Introduction

   On December 27, 2023, the Implementation Act for the Minimum Tax Directive (Minimum Tax Act for short) was promulgated.

   The Bundestag had previously passed the law on November 10, 2023 and the Bundesrat subsequently gave its approval on December 15, 2023.

   The new Minimum Taxation Act serves to implement the EU Minimum Taxation Directive, which the EU member states were obliged to implement by the end of 2023.

   Content of the new minimum tax law

   The core of the transposition law – which in its full name is the “Law on the implementation of the Directive to ensure global minimum taxation for multinational enterprise groups and large domestic groups in the Union” – is the regulation of effective minimum taxation at a global level.

   It is intended to counteract threats to competition and aggressive tax planning.

   To this end, the international community (G20 countries in cooperation with the OECD) has taken certain measures to combat profit reduction and profit shifting.

   The new minimum tax law applies to all financial years beginning after December 31, 2023, with the exception of the secondary supplementary tax regulation.

   The secondary supplementary tax regulation only applies to financial years beginning after December 30, 2024.

   The two-pillar solution

   The Minimum Taxation Act is part of the so-called two-pillar solution and is aimed in particular at implementing the second pillar (“Pillar Two”).

   The first of these two pillars (“Pillar One”) of the international agreements on which this is based provides for new tax nexus points and regulations for the distribution of profits between several countries.

   Particularly due to advancing digitalization, companies would otherwise often operate in other countries without having a physical presence in that country.

   As a result, profits could be taxed in a place where they were not generated. In this respect, the first pillar affects the question of the “where” of taxation. The first pillar is currently still the subject of political debate.

   The second pillar concerns regulations for the introduction of effective minimum taxation at a global level and therefore the question of how high taxation should be. Corresponding regulations are intended to counteract aggressive tax planning and harmful competition.

   Irrespective of how an individual state structures tax liability and the extent to which tax concessions are to be granted, for example, a general minimum threshold for taxation should apply. This should make tax planning less risky. In order to close gaps in taxation, certain options for subsequent taxation should apply.

   The second pillar and the associated provisions of the Minimum Tax Act are intended to remedy this. The new Minimum Tax Act obliges larger companies to pay tax on profits in certain cases. Any negative difference to the specified minimum tax rate must be retaxed in the home country.

   Adjustment of income and foreign tax regulations

   The adjustment of income tax and foreign tax must be accompanied by the introduction of the Minimum Tax Act.

   Who is affected by the Minimum Taxation Act?

   The new minimum taxation law binds large nationally or internationally active companies or groups of companies with a turnover of at least EUR 750 million in at least two of the last four financial years. The legal form of the company or group of companies is irrelevant.

   There is an exception to this in accordance with Section 83 of the Minimum Taxation Act if the company’s international activities are subordinate. This is the case if the company has business units in no more than 6 tax jurisdictions and the total assets of these business units do not exceed EUR 50 million. In this case, these are not taxable business units.

   The provisions of the new minimum tax law pose major challenges for the companies concerned with regard to the necessary procurement and evaluation of the extensive data. The prescribed calculation system can only be complied with if these large volumes of data are comprehensively evaluated. Companies often lack this data, have not collected it in the past or it is not or not fully stored in the relevant IT systems.

   However, the new minimum tax law provides for certain simplifications and transitional regulations for the first three years. Specifically, this relates to the simplified materiality test, the simplified effective tax rate test and the substance test.

   There are also other simplifications without time limits, such as in Section 80 of the Minimum Tax Act for immaterial business units upon application.

   Concept of minimum tax

   General

   The minimum tax applicable under the new implementation law is made up of three factors:

   • the primary,
   • the secondary; and
   • the national supplementary tax amount.

   Primary and secondary

   The primary and secondary supplementary tax amounts relate to the difference in the event of under-taxation of a business unit.

   The parent companies of the corporate group are generally subject to the primary supplementary tax regulation.

   The secondary supplementary tax regulation serves as a subsidiary catch-all provision for cases that are not already covered by the primary supplementary tax amount.

   National Supplementary Tax

   The national supplementary tax amount is the increase amount determined in the Federal Republic of Germany for the respective business unit.

   The tax increase amount is calculated on the basis of a minimum tax rate of 15 percent.

   Overall, the minimum tax is a separate tax that applies in addition to the income and corporation tax that is due anyway, irrespective of income and legal form.

   New Minimum tax law in Germany – Conclusion

   Germany’s enactment of the Minimum Tax Act marks a significant step towards aligning with the EU’s directive for global minimum taxation, aiming to curb aggressive tax planning and ensure fair competition.

   Effective from the fiscal year beginning after December 31, 2023, this legislation targets large multinational and domestic corporations, setting a minimum tax rate of 15% to prevent profit shifting and reduce tax evasion.

   With its comprehensive approach and inclusion of transitional simplifications, the law represents an important shift in international tax policy, reinforcing Germany’s commitment to the OECD and G20’s two-pillar solution for global tax reform.

   Final thoughts

   if you have any queries about this article on the New Minimum tax law in Germany, or German tax matters in general, then please get in touch.

9. Canada and Global Minimum Tax implementation: A closer look

   17 August 2023 8:38 am Leave a Comment

   Canada and Global Minimum Tax implementation – Introduction

   The wheels of international tax reform continue to turn as Canada takes significant strides to implement the OECD’s Pillar Two global minimum tax (GMT) recommendations.

   On August 4, 2023, the Department of Finance unveiled draft legislation outlining the implementation of two pivotal elements of Pillar Two: the income inclusion rule (IIR) and a qualified domestic minimum top-up tax (QDMTT).

   The aim is to align Canada’s tax landscape with the evolving international consensus on curbing tax base erosion and profit shifting.

   Let’s have a look at the key aspects of this draft legislation, along with insights into the broader implications it holds.

   Pillar Two at a Glance: IIR and QDMTT Implementation

   The draft legislation holds particular importance for multinational enterprises (MNEs) as it focuses on two crucial aspects of the GMT framework:

   • the income inclusion rule (IIR); and
   • the qualified domestic minimum top-up tax (QDMTT).

   These provisions are designed to ensure that MNEs pay a minimum level of tax on their global income, irrespective of their jurisdiction of operation

   The income inclusion rule (IIR)

   The IIR, closely aligned with the OECD’s model rules and the accompanying commentary, obliges a qualifying MNE group to include a top-up amount in its income.

   This amount is determined by evaluating the group’s effective tax rate against the stipulated minimum rate of 15%.

   Notably, the draft legislation incorporates mechanisms for calculating this top-up amount, encompassing factors such as excess profits, substance-based income exclusions, and adjusted covered taxes.

   The goal is to prevent instances where MNEs might be subject to lower tax rates in certain jurisdictions.

   The qualified domestic minimum top-up tax (QDMTT)

   The QDMTT, on the other hand, allows jurisdictions to implement a domestic top-up tax to align with the principles of Pillar Two.

   This is aimed at domestic entities within the scope of Pillar Two, counterbalancing the global minimum tax liability.

   The intricacies of the QDMTT provision, including computations and adjustments, are outlined in the draft legislation to ensure an encompassing and fair application.

   Administration of GMTA

   To effectively implement the Global Minimum Tax Act (GMTA), the draft legislation covers a spectrum of administrative facets.

   These include provisions for assessments, appeals, enforcement, audit, collection, penalties, and other vital components to ensure the smooth functioning of the new tax regime.

   As part of compliance measures, the legislation introduces the requirement of filing a GloBE information return (GIR) within 15 months of the fiscal year’s end, with potential penalties for non-compliance.

   It’s important to note that the legislation doesn’t shy away from significant penalties for non-compliance.

   Failure to file the required GIR within the stipulated timeframe could result in penalties of up to $1 million. Moreover, penalties may also be imposed as a percentage of taxes owed under the GMTA for not filing Part II or Part IV returns, adding a layer of urgency to adhere to these provisions.

   How does GMTA live with the existing tax framework?

   One of the central themes that emerge from the draft legislation is the intricate interplay between the GMTA and Canada’s existing tax framework.

   While the legislation attempts to bridge these two domains, certain aspects remain to be ironed out.

   Notably, the interaction between the GMTA and provisions within the Income Tax Act (ITA) raises questions about the allocation of losses or tax attributions under the ITA to offset taxes owing under the GMTA.

   Additionally, the draft legislation is deliberately silent on the specifics of this interaction, particularly concerning issues like Canadian foreign affiliate and foreign accrual property regimes.

   As businesses and professionals delve into the consultation process, these areas of ambiguity are likely to be focal points of discussion, aiming to ensure a harmonious alignment between the new regime and the existing tax landscape.

   Looking ahead

   The consultation process for the draft legislation is underway, with the Department of Finance welcoming feedback until September 29, 2023.

   During this period, stakeholders, including businesses, tax professionals, and policymakers, have the opportunity to contribute insights and perspectives to shape the final legislation.

   The complex and evolving nature of international taxation underscores the importance of robust consultation, as the new rules have far-reaching implications for cross-border businesses.

   Canada and Global Minimum Tax – Conclusion

   Canada’s proactive approach to aligning its tax laws with the global consensus on minimum taxation is a significant stride.

   As the draft legislation undergoes scrutiny and refinement, it’s essential to recognize its implications not only for multinational enterprises but also for the broader tax landscape.

   The interplay between the GMTA and the existing tax regime will be closely watched, highlighting the intricate path of international tax reform and the commitment of nations to creating a fair and balanced tax environment.

   If you have any queries about this article on Canada and Global Minimum Tax, or Canadian tax matters in general, then please get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article..

10. EU agreement on Pillar Two / Minimum Taxation Directive

    2 January 2023 10:18 am Leave a Comment

    Introduction – EU agreement on Pillar Two

    Eventually, after a number of failed attempts, the EU has reached agreement on the Minimum Taxation Agreement.

    The 27 European Union Member States reached agreement on the 12 December 2022.

    The agreement clears the way for the implementation of a minimum level of taxation for the largest companies. These reforms are also known as the Pillar Two or Minimum Taxation Directive.

    The Directive has to be transposed into Member States’ national law by the end of 2023.

    What is it?

    Broadly, the agreed Directive reflects the global OECD agreement with some adjustments.

    The new agreement will apply to any large group of companies whether domestic or international. The rules will apply to such organisations with aggregate revenues of over €750 million a year. As such, it will only apply to the biggest companies around the globe.

    It should be noted that it is necessary for either the parent company or a subsidiary of the group to be situated within the EU.

    The rate of the minimum tax

    The effective tax rate is established for a location by dividing the taxes paid by the entities in the jurisdiction by their income.

    Where this calculation results in a rate of tax below 15% then the group must ‘top-up’ the tax paid such that the overall rate is 15%.

    What’s next?

    The development means that the EU will be a pioneer around Pillar Two. However, it seems highly likely that other jurisdictions (I.e non-EU) will follow suit.

    Further, by the end of this month (Jan 2023), it is expected that the OECD will publish its own guidelines for Pillar Two. Again, these should act as a catalyst for wider adoption of Pillar Two internationally.

    In addition, it is expected that they will shed some light on some of the key outstanding issues around how the US rules (such as US GILTI rules) will conform with Pillar Two.

    If you have any queries about the EU agreement on Pillar Two, or international tax matters generally, then please do not hesitate to get in touch.

    The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article