EU decides to raise rates in low-tax jurisdictions from 2024

The European Union (EU) approved the introduction of anti-offshore tax mechanisms of the Organization for Economic Cooperation and Development (OECD, unites developed countries) for global corporations – Pillar 1 and Pillar 2. This is stated in the list of decisions of the Council of Europe (CE), published on December 15.

The first principle provides for the taxation of global companies with revenues of more than 20 billion euros at the place of receipt of their income. Initially, this measure was modeled in order for digital giants to pay taxes in the country whose population brought them income. Pillar 2 raises the minimum income tax rate to 15% for holdings with incomes of 750 million euros. The main task of this mechanism is to equalize fiscal conditions between jurisdictions. Moreover, Pillar 2 CE recommended to be implemented at the pan-European level as early as January 1, 2024. The Directive should be integrated into the national legislation of EU members by the end of 2023. The EU, thus, will become a pioneer in the application of the global agreement on Pillar 2, according to the materials of the CE.

In October 2021, more than 130 countries, including Russia, agreed to implement these principles. In general, the topic of adapting Russian legislation to international initiatives was the main one on last year’s tax agenda. The Ministry of Finance called the integration of Pillar 1 and Pillar 2 into the Tax Code (TC) one of the main tasks for 2022. An active discussion was also held at the OECD level. In December last year, the organization prepared a framework law on the integration of Pillar 2. But after the start of the NWO, the discussion on international initiatives came to naught not only along the Russia-OECD line, but also within the organization as a whole. Moreover, the return to the discussion of this topic among developed countries was quite unexpected: it was excluded from the agenda of the last meeting of the Council for Economic and Financial Affairs of Europe (ECOFIN) on December 6th. B1 experts (former EY in Russia) drew attention to this. The lull arose, among other things, due to the refusal of first Poland and then Hungary to vote for the integration of Pillar 2 and the postponement of the start of new rules from 2023 to 2024. As a result, a number of EU countries – France, Germany, the Netherlands, Italy and Spain – developed their bills and decided to adopt the Pillar 2 standards on an individual basis, without waiting for developments on the pan-European platform, B1 recalled.