A new minimum rate for EU companies

New year, New Rules. Since 1st January 2024, new EU rules have come into effect, introducing a minimum rate of effective taxation of 15% for multinational companies active in EU Member States.

 We are currently facing the implementation of rules agreed upon in the global agreement on international tax reform of 2021, known as “Pillar 2.” The benefits should be seen both within the EU and globally, bringing greater fairness and stability to the tax landscape. The main goal is to reduce the incentive for companies to shift profits to low-tax jurisdictions.

With these new rules, the aim is to avoid a battle between countries to attract investments by lowering their corporate income tax rates. The European Union has been a front-runner in translating these rules into hard law; however, approximately 140 jurisdictions worldwide have now signed up to these rules, including a number of countries with zero-tax jurisdictions that have announced the introduction of corporate income tax.

With this significant historic act, the EU has pledged to be among the first to implement the OECD tax reform, applying the rules to multinational enterprise groups and large-scale domestic groups in the EU, with combined financial revenues of more than €750 million a year and with a parent company or subsidiary in an EU Member State.