Austrian Ministry of Finance (BMF) publishes a consultation draft for a Minimum Tax Act (MinBestG)

On 3 October 2023 the BMF has published a consultation draft for an act to ensure a Global Minimum Tax (Pillar II). The consultation period ends on 20 October 2023. The new regulations will enter into force as of 1 January 2024.

The Minimum Tax Act transposes into domestic law the complex framework of the European Unions’ Directive on a global minimum level of taxation as well as of the OECD’s model rules. The following key points are worth emphasizing:

Scope

Only large company groups reaching a minimum of EUR 750 million in net sales in at least two of the four past financial years fall within the personal scope. It is irrespective whether it is a solely domestic or a multinational company group.

Levy of the top-up tax

The global minimum tax rate of 15% is ensured via the income inclusion rule (IIR) and (as of 2025) also via the undertaxed profits rule (UTPR). For domestic constituent entities subject to an effective tax rate lower than 15%, a domestic top-up tax is introduced (QDMTT) preceding IIR and UTPR. Thereby, an outflow of domestic tax base to a foreign ultimate parent entity’s jurisdiction is prevented. On the other hand, the domestic top-up tax results in Austrian constituent entities of foreign company groups being required to comply with corresponding Austrian compliance obligations as well.

Safe harbour rules

In order to simplify administration the following safe harbour rules are included in the Minimum Tax Act:

• Safe harbour for qualified (foreign) domestic top-up taxes (e.g. relevant on the level of the Austrian ultimate parent company regarding foreign (low-taxed) business units)
• Transitional CbCR safe harbour (de minimis test, effective tax rate test, routine profits test)
• Simplified calculation of CbCR safe harbour for non-material constituent entities.

When determining the requirements of a safe harbour, a country-based approach is to be taken. If a safe harbour is granted, the amount of the top-up tax is reduced to zero for the respective tax jurisdiction and determining the effective tax rate according to the complex general framework is not required. However, this does not affect compliance obligations such as the obligation to submit a Pillar II tax return.

The transitional CbCR safe harbours do only apply for the first three financial years (starting 2024). The significant simplification is that for these tests the CbCR and financial information (already available within the company) is used.

Outlook

The consultation draft largely follows the EU Directive, the OECD model rules as well as further publications of the OECD such as the administrative guidance or safe harbour rules which provide for significant simplifications in the transition period.

The challenge for affected companies is to implement this completely new framework within a short time period, to derive many data points, to adapt the inhouse processes to the new requirements and to integrate them to the systems.

Of course our Pillar II experts are available for an analysis of the potential consequences within the company group as well as for support regarding implementation.