EU postpones implementation of Global Minimum Tax

The finance ministers of EU Member States failed to reach a unanimous agreement - required in tax matters - on the EU directive aimed at implementing the global minimum tax when they met in Brussels earlier in March 2022. In accordance with the European Commission's proposal for a directive published on 12 March, the introduction of a Global Minimum Tax has been postponed with a year, accordingly.

The global minimum tax is the second of two pillars of the international tax deal that was agreed upon in October 2021 by more than 130 countries to address the tax challenges arising from the digitalisation of the economy and regulate tax competition between tax jurisdictions. As all EU Member States agreed to join the tax deal previously, the EU Commission presented a proposal for an EU directive to implement the minimum tax uniformly across the EU.

Despite the French efforts and priority of the current French presidency of the Council of the European Union to formulate a compromise, the governments of Sweden, Poland, Malta, and Estonia still voiced concerns about the directive and the timeline thereof and withheld their support for the compromise. As a consequence, the Commission has also let go of the original timetable and postponed the deadline for transposing the rules into national law to 31 December 2023. As it stands, the global minimum tax rules would therefore apply EU-wide from 1 January 2024.

The regulators, the Member States and the taxpayers might all make use of the additional one-year transitional period, since quite a few questions still remained with regard to the original proposal (scope of ‘covered taxes’, tax incentive regimes, etc).

Simultaneously with the EU proposal, the OECD also released its detailed technical guidance on the Pillar Two model rules for 15% global minimum tax on 14 March 2022. As the first step in this process, the Inclusive Framework will undertake a public consultation to collect input from stakeholders: the Commentary explains the intended outcomes under the GloBE Rules and provides definition for key terms and the Illustrative examples are to provide clear rules for application of the Model GloBE Rules to certain fact patterns.

The EU proposal itself also refers to the OECD guidance - inter alia with regard to the covered taxes - thus the OECD Framework should be a significant step forward the eventual practical implementation of the global minimum corporate tax rules.