EU Member States unanimously adopted the EU directive on global minimum tax (“Pillar II”)
On 15 December 2022, the Council of the EU formally adopted the directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union. Hungary was the last EU member state to agree to the EU directive, the required unanimity has been reached. Therefore, EU member states are now obliged to implement the Pillar II rules as regards the effective tax rate of 15% for large-scale groups. The transposition is to be made until 31 December 2023; the new rules are to be applied as of 1 January 2024.
To ensure an effective minimum tax rate for large-scale groups and to put a floor on excessive tax competition between jurisdictions, an additional amount of tax (“top-up tax”) amounting to the difference between the global minimum tax rate of 15% and the lower effective tax rate is collected. These rules apply to entities and permanent establishments of groups with annual revenue of EUR 750 million or more. Even if no top-up tax becomes due, each group entity has to file its own tax return (top-up tax information return) which creates additional compliance obligations. For further details on Pillar II, please see our microsite (available in German only): https://www.pwc.at/de/dienstleistungen/steuerberatung/corporate-tax/pillar-2.html
Developments at OECD level
The OECD announced the release of further information on open issues on the implementation of Pillar II in the form of an “Administrative Guidance” by the end of 2022. These guidelines are supposed to specify details on filing obligations and comprise potential safe-harbour rules aiming at facilitating compliance by enterprises and administration by tax authorities. It is expected that the release of these details will give a complete picture of the obligations for enterprises resulting from Pillar II.
Conclusion
Pillar II rules will be implemented within the European Union. In order to be well prepared for these new challenges, enterprises should initiate concrete implementation at an early stage – if not yet started. In addition to tax issues relating to the highly complex Pillar II rules, data- and process-related matters are decisive: The mandatory filing of Pillar II tax returns requires large amounts of data, which are often not yet available in the required form and granularity. The implementation of Pillar II will thus also entail changes in IT systems as well as adaptations to reporting packages.
