A new directive, which introduces a minimum effective tax rate of 15% for multinational companies operating within the European Union, came into force on Monday 1 January.
This applies to large companies with a combined annual turnover in excess of €750 million and a parent company or subsidiary located in an EU country.
The directive includes a common set of rules for calculating and applying a ‘top-up tax’ payable in a given country if the effective tax rate is below 15%. If a subsidiary is not subject to the minimum effective rate in the foreign country where it is located, the Member State of the parent company will apply a ‘top-up tax’ to that entity. Effective taxation will also be guaranteed in cases where the parent company is located outside the EU in a low-tax country that does not apply equivalent rules.
However, Estonia, Latvia, Lithuania, Malta and Slovakia have made use of a provision in the European directive (Article 50) which allows the application of certain provisions to be delayed (see EUROPE 13283/25).
This European framework, which implements the second pillar of an international agreement sealed at OECD level in October 2021 (see EUROPE 12808/2), adapts tax systems to today’s globalised digital world and aims to reduce the race to the bottom in terms of taxation.
The measure is already bearing fruit, with zero-tax jurisdictions announcing the introduction of a corporation tax for the companies concerned, according to a press release issued by the European Commission.
I encourage the 140 signatory jurisdictions of the global tax agreement to rapidly implement “this key reform, which could generate an additional €220 billion each year (and help) to finance essential investments and quality public services”, said the European Commissioner for Economic Affairs, Paolo Gentiloni.
Pillar I of the international reform of the corporate tax system has yet to be finalised (see EUROPE 13270/23). (Original version in French by Mathieu Bion)