Global minimum corporate tax of 15% backed by 130 countries

Facts at a glance

  • OECD plans for a global minimum tax backed by 130 countries, representing 90 % of global GDP
  • 15% rule must not introduced by any country but will give other countries ability for a surcharge (for the difference)
  • Rule only applicable for Multinationals above 750 Million Euro Turn-over (889 $ Million)
  • Exemption for shipping industry
  • OECD believes a further 150 billion $ in global taxes could be achieved
  • New rules to be implemented in 2023

PARIS, July 1 (TAXEDO) – At the end of June, the Paris-based Organisation for Economic Cooperation and Development (OECD), hosted talks about plans to reform international taxation rules and ensure that multinational enterprises (MNEs) pay a fair share of tax wherever they operate. The current international tax system, “which is no longer fit for purpose in a globalised and digitalised 21st century economy” (source OECD), must see some updates.

Leaders of 130 countries, representing almost 90 % of global GDP, discussed the establishment of a new framework for an international tax reform, containing two pillars of changes. Almost surprisingly, most of these countries backed a global overhaul of cross-border taxation of multinational enterprises and agreed a tax rate of at least 15%. The minimum corporate tax rate does not require countries to set their rates at the agreed floor. However, it gives other countries the right to apply a top-up levy to the minimum on companies’ income coming from a country that has a lower rate.

Already in June 2021 the Group of Seven advanced Economies (G7) came to an agreement with the same topic and will be set out at the upcoming G20 meeting in Venice too.

Despite some nine countries did not feel comfortable to join this agreement, mainly low tax jurisdictions Ireland, Estomia and Hungary it is expected that technical details to be agreed by October 2021, so that the new rules can be implemented by 2023. To achieve this goal, the EU needs to implement a new Law.

TAXEDO LLP, Lennard A Kruger

 

 

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