The Czech Presidency of the EU Council has announced its unanimous agreement with the Commission’s proposal for a Directive, which ensures that large multinational groups pay a minimum effective tax rate. This historic agreement brings the EU closer to fulfilling its pledge to be among the first to implement the OECD tax reform. Once in effect, this agreement will introduce fairness, transparency, and stability to the international corporate tax framework.
The Council Directive will be adopted formally via a written procedure and will include a standard set of rules on how to calculate the 15% effective minimum tax rate, which will be applied uniformly across the EU. This minimum tax rate has been agreed upon globally by 137 countries.
The rules will be applicable to multinational enterprise groups and large-scale domestic groups in the EU that generate over €750 million in annual combined financial revenues. The rules will apply to any large group, domestic or international, with a parent or subsidiary based in an EU Member State. If the country where the subsidiary company is located does not enforce the minimum effective rate, there are provisions for the Member State of the parent company to impose a “top-up” tax. This Directive also guarantees effective taxation when the parent company is situated outside the EU in a low-tax country that does not apply similar rules.
Member States have until December 31, 2023, to implement the new rules.