A new era of top-up taxation: draft goes out to consultation

Compensatory taxation, introduced under the GloBE Principles, is an important step in the reform of international tax law, which aims to reduce competition in CIT rates and eliminate tax avoidance practices. The introduction of this mechanism aims to level the playing field for businesses around the world by establishing a global minimum level of taxation.
The GloBE rules, based on the OECD Model Rules and consist of two main rules: The Income Inclusion Rule (IIR) and the Under-taxed Profits Rule (UTPR). The former imposes an additional tax if an international group’s effective tax rate in a jurisdiction is below 15 per cent, while the latter serves as a safeguard when the IIR Principle does not result in adequate taxation.
The implementation of the GloBE Principles covers both international and domestic groups, and the threshold for their application has been set at €750 million of consolidated revenue. The calculation of a country’s effective tax rate requires consideration of the sum of the adjusted taxes of qualified component units and the qualified net income of those units.
The key element of the GloBE Principles is the ultimate parent company, which holds the consolidating interest in all other component units of the group. It has the primary responsibility to apply the IIR Principle to all low-taxed component units of the group.
In order to take into account a variety of situations and minimise administrative burdens, the GloBE Principles provide for arrangements that exclude or limit the effect of their application, such as safe harbours and a de minimis exemption. In addition, EU Member States have the right to establish a qualified national top-up tax.
From Poland’s perspective, the national equalisation tax will be the main element of the GloBE System. In practice, it is assumed that taxpayers obliged to apply the effective tax rate test for the purposes of this tax will be several thousand entities (primarily Polish component units of international groups, as a rule with a top-level parent located in another country), while the global equalisation tax will apply only to several dozen international groups with a Polish top-level parent.
The introduction of compensatory taxation is important to ensure fair tax competition internationally and to protect the basic income of states. At the same time, precise and flexible regulatory mechanisms are key to ensuring the effectiveness and balance of these new rules.
According to the draft law, it is expected to enter into force on 1 January 2025 and will certainly be a significant event for any large international group operating in Poland.