EU proposes legislation to implement 15% corporate tax rate

The European Commission has proposed a law that would implement in Europe the global agreement reached between the world’s 20 largest economies (G20) on a minimum corporate tax rate.

The Commission’s proposal includes a common set of rules on how to calculate the globally agreed 15% effective tax rate, so that it is applied consistently across the EU.

“In October this year, 137 countries backed a landmark multilateral agreement to transform global corporate taxation,” EU Economics Commissioner Paolo Gentiloni told a news conference.

“The directive we are proposing will ensure that the new minimum effective tax rate of 15% for large companies will be applied in a way that is fully compatible with EU law,” he said.

Gentiloni said the Commission would propose a second law in mid-2022 to implement the other part of the OECD and G20 agreement on the reallocation of taxing rights.

EU minimum corporate tax legislation will apply to any business, national and international, generating a combined turnover of €750 million per year, located in the EU.

To reduce the impact on groups carrying out real economic activities, companies will be able to exclude from the tax calculation an amount of income equal to 5% of the value of tangible assets and 5% of the wage bill, the Commission said. .

For a 10-year transition period, the exclusions will be higher, starting at 8% of tangible assets and 10% of payroll which will gradually decrease each year.

For the proposed law to come into force, all EU governments will need to agree and it will also need to be consulted with the European Parliament.

Luisa D. Fuller