Minimum tax at European level for multinationals

Applicability

The directive applies to group entities established in the EU and that are part of a multinational or sizeable national group, with a consolidated annual turnover of at least € 750 million. Government bodies, non-profit organisations and pension funds, etc., are excluded.

Effective taxation and top-up tax

Based on the directive, groups must pay at least 15% corporation tax in every country where they operate. This minimum 15% tax rate concerns effective taxation. This means that besides countries with a nominal tax rate below 15%, also intended are countries where the group pays fewer taxes due to a favourable system, such as innovation deduction for R&D activities, being applied.

If the group in a country does not pay effective taxation of 15%, a top-up tax must occur. In principle, this top-up tax is applied with regard to the ultimate parent company.  If the ultimate parent entity's state of residence does not provide for a top-up tax – which is sufficiently high – the tax authority of the underlying company/companies may apply this.

Moreover, Member States may decide to implement a qualified national top-up tax. In this case, all low-taxed entities established in that Member State are subject to the national top-up tax. This national top-up tax can then be settled with the top-up tax owed in the parent entity's Member State.

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