An agreement initiated by the OECD and endorsed by nearly 140 countries aims to address tax challenges related to the digital economy. An EU directive published in December 2022 requires Member States of the European Union to implement a regime guaranteeing a minimum level of global taxation for multinationals. This directive consists of two pillars.
The first pillar allocates the profits of multinational companies to the countries where their consumers are located. For companies with a consolidated annual turnover exceeding 20 billion euros, 25% of profits exceeding 10% of turnover will be allocated to consumer countries. Only states where companies reach a turnover of more than one million euros will benefit from this allocation, with a reduced threshold of 250,000 euros for countries with a GDP below 40 billion euros. The implementation of this pillar is planned for 2024.
The second pillar aims to ensure that multinational companies pay a minimum tax rate of 15% on their profits. Companies with a consolidated global turnover of at least 750 million euros per year are affected. The effective tax rate is calculated on a jurisdictional basis, and if this rate is below 15%, an additional tax must be paid. The rules for levying this additional tax depend on the income inclusion rule and the rule on under-taxed profits. Member States can also introduce their own qualified national minimum tax rule.
The directive must be transposed by the Member States by the end of 2023. Therefore, multinational groups must adapt to these rules, assess their impact, and determine their tax obligations in each jurisdiction where they operate. In Belgium, a minimum tax of 15% has already been introduced by limiting the deduction of carried-forward tax losses to 40% of profits exceeding 1 million euros.
It is essential to monitor legislative developments and understand the impact of these rules on the affected companies.