EU asks to force multinationals to pay a minimum corporate tax of 15%

The European Commission presented a legislative proposal that will oblige multinationals to pay a minimum effective corporate tax rate of 15%, in line with the agreement reached globally in the Organization for Economic Cooperation and Development (OECD).

The draft directive, which has yet to be approved unanimously by the community partners, would translate into community legislation the “historic” pact reached in October by 137 jurisdictions, including the 27 countries of the bloc despite initial doubts from Ireland, Estonia or Hungary.

In particular, the regulation focuses on the so-called “pillar 2” of the OECD agreement, which seeks to establish a “minimum level of taxation” for companies.

In a press conference, the Commissioner for the Economy, Paolo Gentiloni, explained that Brussels does not have an exact calculation of how much the collection will increase in the bloc thanks to these regulations and limited himself to stating that “a few thousand million” will emerge.

Thus, the directive “establishes how the effective rate should be calculated” and provides “clear and legally binding rules that will guarantee that large groups pay a minimum rate of 15% in the EU for each jurisdiction in which they operate.”

The new rules will apply to all business groups, both international and European, and including financial institutions, with annual revenues of more than 750 million euros that are active in the EU through a subsidiary or its parent company.

However, public companies, NGOs and entities that are part of a multinational group that fall outside the agreed scope of the OECD are excluded.

In this way, if the effective rate paid by a company falls below 15% in a certain country, the group to which said firm belongs will have to pay an extra amount to reach that level of taxation, regardless of whether the subsidiary is located in a country that has signed the OECD agreement or not.

The Community Executive gives the example of a company with a profit of 1,000 euros that has paid taxes with an effective tax of 10%.

In that case, the parent group to which the company belongs will have to pay an additional tax that covers five percentage points up to the agreed minimum rate, that is, 50 euros.

The draft directive includes some “exceptions” also included in the OECD agreement with the aim of reducing their impact on companies that carry out “real economic activities”.

In particular, companies may exclude from the amount of income 5% of the value of their tangible assets and 5% of the wage bill, as well as minimum amounts of benefits to “reduce the regulatory burden in low-risk situations.”

Gentiloni, who defended that the proposal is “totally” in line with the OECD agreement, urged the member states to reach an agreement to approve it during the next six months so that it can enter into force in 2023, the date agreed in the international forum.