Work is underway on a global minimum tax
The Ministry of Finance published an announcement concerning the ongoing work on the draft of the Act on compensatory taxation of entities that are part of international and domestic groups, implementing the provisions of the EU Directive on ensuring the global minimum level of taxation of multinational enterprise groups.
The purpose of the Directive is to implement in the European Union the global rules against erosion of the tax base (the so-called GloBE rules) – the main part of the so-called OECD Pillar II.
15% limit
The Ministry of Finance points out that the introduction of a global minimum tax is intended to address the problem of international taxation. It is foreseen that the largest multinational companies will be rach year verified whether they meet the requirement of a minimum effective tax level of 15%. If the effective level of income tax for a particular international group in a particular jurisdiction is below 15%, a corresponding top-up tax will be imposed on such group.
Three types of tax
As indicated, it is planned that the global minimum tax system will be based on three types of top-up tax:
- a global top-up tax imposing the obligation to pay the corresponding top-up tax, in principle, on the top parent of the group,
- a domestic top-up tax, the mechanism of which is similar to the global top-up tax, but is paid in that jurisdiction where the low-taxed income is located, and
- a tax on under-taxed profits imposing an obligation to pay a parent company’s compensation tax, on group entities located in a given jurisdiction, when that parent company operates in another jurisdiction where there is no global top-up tax.
The government is scheduled to adopt the draft of the Act in the third quarter of 2024.