On December 12, 2022, the European Union (EU) announced that an agreement was reached with all member states to implement the Pillar Two global minimum tax in the form of an EU directive. Specifically, the EU Committee of Permanent Representatives announced that it was able to gather the unanimous support needed to procure an EU directive. As a result, it will now submit a written procedure for formal adoption that will require all member states to implement the global minimum tax into all EU member states’ laws by December 2023. This EU agreement comes in response to the agreement reached by members of the OECD/G20 Inclusive Framework Initiative on October 8, 2021, in which all members agreed to implement rules that would ensure large multinational enterprises pay an effective global minimum tax rate of 15% on a jurisdictional basis.
The recent announcement by the EU is significant due to prior disagreements between EU member states and Hungary, which had reservations about whether implementation of the global minimum tax would undermine the competitiveness of Hungarian companies. These objections were withdrawn by Hungarian governmental officials prior to the EU announcement on December 12, 2022. Following announcement of the agreement in the EU, Polish officials appeared to vacillate on their support for the directive, citing that the Polish government needed additional time for analysis. Notwithstanding the Polish need for additional “study,” the EU Council view appears to be that Poland will approve the directive. However, it should be noted that the directive has not been formally adopted yet.
Multinational enterprises with annual global revenues of at least EUR 750 million are likely to be affected by the global minimum tax. They should seriously consider whether their current data systems have the ability to source, compute, and otherwise comply with the anticipated increased demands on the tax function arising from the Pillar Two global minimum tax.
FORVIS recommends that potentially in-scope taxpayers consult with their tax advisors to discuss appropriate next steps for Pillar Two global minimum tax readiness. Submit the Contact Us form below if you have questions.