With the introduction of a global minimum tax, a significant change in international tax law is imminent, which internationally operating companies must prepare for.
International tax law is on the verge of a profound reform, primarily affecting internationally operating corporations. The introduction of a global minimum tax rate of 15 percent is intended to prevent corporations from shifting profits abroad to evade their tax obligations, according to the business law firm MTR Legal Rechtsanwälte , which also advises its clients on international tax law.
About two years ago, in July 2021, the finance ministers of the G20 countries agreed on a reform of international corporate taxation. The Federal Ministry of Finance has now presented a draft bill for implementing the reform on July 10, 2023. The new regulation is based on two pillars.
The first pillar primarily relates to the taxation of internationally operating digital corporations. They are expected to pay taxes in the country where their users are located and thus where the profits are generated. Previously, taxation only occurred in the country where the company has its headquarters. Now, taxing rights are to be redistributed from the state of residency to market states where companies generate profits without being physically present. This redistribution should also make the introduction of national digital taxes unnecessary.
The second pillar is the introduction of a global minimum tax. This is intended to establish a worldwide applicable minimum level of taxation. If the level is not reached in a country, an additional taxation occurs. The system aims to ensure more fairness in international tax law and prevent the shifting of profits to a country with lower tax rates.
In total, 138 countries within the framework of the OECD have agreed on a reform of international corporate taxation with an effective minimum taxation of 15 percent. The minimum taxation is to apply to internationally operating companies with a turnover of more than 750 million euros. By the end of 2023, a corresponding EU directive is to be transposed into national law.
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