The EU imposes a 15% minimum effective tax rate on multinational companies
G4media.ro reported on January 2, 2024 that the latest EU tax rules came into effect on January 2, and are levied on multinational companies operating in EU member states with annual revenues exceeding 750 million euros.
This tax implements a minimum effective tax rate of 15%, and companies will be restricted from transferring profits to low-tax jurisdictions. After the implementation of the tax code, the fairness and stability of the EU and global tax structure will be greatly improved. It is also expected to generate an additional US$220 billion in revenue each year to help EU countries provide higher-quality public services.
The initial wave of jurisdictions adopting this global minimum tax includes the European Union, the United Kingdom, Norway, Australia, South Korea, Japan, and Canada. These rules will apply to multinational companies with an annual turnover exceeding €750 million. Notably, countries often considered tax havens, such as Ireland, Luxembourg, the Netherlands, Switzerland, and Barbados with its former corporate tax rate of 5.5%, have joined this transformative initiative.
The OECD-led agreement encompasses two key pillars: the first aims to ensure multinational corporations pay taxes where they conduct business, while the second establishes a universal minimum corporate tax rate. Pascal Saint-Amans, the OECD’s former tax chief, emphasized that the successful implementation of the second pillar necessitates a critical mass of countries, creating a scenario where avoiding compliance becomes increasingly challenging.
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