EMEA Tax & Legal Insurance Newsflash
European Union
Pillar 2 - Country Updates
Previous updates
General Updates
On 17 June 2024, the OECD/G20 Inclusive Framework on BEPS published the fourth set of Administrative Guidance on the GloBE rules of Pillar Two, intending to clarify the operation of the GloBE rules. This package of guidance sheds light on some areas where businesses and tax authorities have previously sought clarification and simplification: deferred tax liability recapture, divergences between GloBE and accounting carrying values, allocation of cross-border current taxes, allocation of cross-border deferred taxes, allocation of profits and taxes in structures including flow-through entities, and treatment of securitisation vehicles.
EU Infringement Action against certain states
After adopting infringement decisions against member states which have failed to transpose the Pillar 2 Directive into national legislation by the deadline of 31 December 2023, most member states have acted and already published their final bills.
Denmark
The Danish government enacted the amendments to the Danish Minimum Taxation Act in regards to the inclusion of the OECD’s Administrative Guidance on 4 June 2024.
The bill was published in the Official Gazette on 11 June 2024.
Estonia
The Estonian government approved a draft bill amending the law which implements Article 50 of the EU minimum tax Directive (which permits Estonia to defer applying the IIR and UTPR until 1 January 2030). The bill was submitted to the Estonian Parliament, which passed it on 10 April 2024.
On 22 April 2024 the legislation was approved by the President and the bill was published in the Official Gazette on 2 May 2024.
All requirements of the new bill will apply for financial years starting after 22 June 2024.
Greece
On 5 April 2024 the Greek Parliament adopted the bill 5100/2024 which incorporated into the Greek legislation the EU Council Directive 2022/2523 on ensuring a global minimum level of taxation for multinational groups and large-scale domestic groups in the Union.
Latvia
20 June 2024 the Latvian Law on Ensuring a Global Minimum Tax Level for Large Enterprise Groups was published in the Official Gazette after it was approved in its third and final reading by the Latvian Saeima (parliament) on 6 June 2024.
Latvia has chosen to delay the application of the Pillar 2 global minimum tax (GloBE) rules, as permitted by Council Directive (EU) 2022/2523, which applies to EU Member States with no more than 12 ultimate parent entities within the Directive’s scope. Despite the delay, Latvia will partially implement the Directive by introducing relevant definitions, provisions, and reporting requirements to ensure proper rule operation within the EU. Notably, the law does not currently include the main income inclusion rule (IIR) and undertaxed payment/profit rule (UTPR), which will be introduced at a later date and must apply no later than fiscal years beginning on or after December 31, 2029.
Lithuania
On 6 June 2024, the Seimas of Lithuania (Parlament) adopted the Law of the Republic of Lithuania on Ensuring the Minimum Taxation Level of Groups of Subjects, which partially implements the Council Directive (EU) 2022/2523 of 12/15/2022, i.e., extension according to Article 50 (1). The adopted law is submitted to the President of the Republic of Lithuania for signature. This is only a partial implementation of the Pillar Two Directive and, in the near future, a new draft law with the provisions of the Directive will be drafted.
On 10 June 2024, the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania submitted for comments the description of the procedure for submitting information notices necessary to ensure the minimum level of taxation of groups of entities in the European Union, which were prepared in the implementation of both the Law of the Republic of Lithuania on Ensuring the Minimum Level of Taxation of Groups of Subjects and and the provisions of the the EU Minimum Tax Directive.
It was published 19 June 2024 in the Official Gazette.
Luxembourg
On 12 June 2024, the Luxembourg government submitted a draft law (n° 8396) to amend the law of 22 December 2023 introducing the Pillar 2 minimum taxation rules (the "Pillar 2 Law"). The Pillar 2 Law introduced the Income Inclusion Rule (“IIR”), Undertaxed Profits Rule (“UTPR”) and Qualified Domestic Minimum Top-up Tax (“QDMTT”) into Luxembourg law for fiscal years starting on or after 31 December 2023 (with a general one year delay for the UTPR to become effective).
While the draft law mainly aims to incorporate administrative guidance issued by the OECD until the end of 2023, the commentary to the draft law clarifies some important principles which could be relevant for Luxembourg businesses impacted by the rules.
The administrative guidance issued by the OECD on 17 June 2024, that is specifically relevant with respect to the exclusion of securitisation vehicles from QDMTT, has so far not been included in the draft law. This shows the complexity for Luxembourg and other jurisdictions to continue incorporating additional guidance on an ongoing basis.
Prior to this the Luxembourg Government issued a FAQ on the Pillar II Tax Act (n° A864) on 25 March 2024.
Poland
On 25 April 2024, a draft Act implementing into the Polish legal system the provisions of the EU global minimum tax Directive was published. The deadline for adopting the draft Act by the Council of Ministers was planned for Q3 2024. The law will introduce IIR, UTPR, and QDMTT.
The law generally intends to come into effect from January 1, 2025. Transitional provisions provide for the optional possibility of retroactive application of the provisions of the law from January 1, 2024 (with some exceptions - UTPR rules). The Ministry of Finance announced the launch of public consultations on the draft Act, until 17 May 2024.
Poland has to implement the Pillar Two rules in line with the Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union. Temporary provisions should be analyzed in order to assess whether the Pillar Two rules should be applied retroactively starting from January 1, 2024, e.g. if it would be easier from the Group’s administrative perspective to pay QDMTT in Poland based on the Polish GAAP and apply QDMTT safe harbour at the parent’s level.
Portugal
On July 10 2024 the Portuguese government initiated the consultation process for the legislation on transposing the directive into domestic tax law. Feedback deadline is 31 July 2024.
Spain
On June 4, 2024, the Council of Ministers approved on the second reading the Preliminary Draft Law to transpose the European Directive (EU) 2022/2523 of the Council, dated December 15, 2022, concerning the assurance of a minimum global tax level of 15% for multinational enterprise groups and large-scale national groups within the Union. The bill will be forwarded to the General Courts for processing and subsequent approval.
The bill aligns with the guidelines outlined in Pilar 2 of the OECD initiative and aims to bring the Spanish legal framework in line with the international standards in this regard. It contemplates a complementary tax for those multinational and national business groups operating in Spain, which has three complementary configurations:
- National complementary tax: applicable to multinational and national business groups located in Spain that do not meet a minimum tax rate of 15% within Spanish territory. It is important to highlight that the national complementary tax is compatible with the minimum rate of 15% established in domestic legislation that came into force in 2022. The difference is that the national complementary rate requires a minimum taxation of 15% on the adjusted accounting result, which is calculated with the parameters established by the Directive and is the same for all countries. On the other hand, the minimum corporate tax rate is determined on the tax base.
- Primary complementary tax: applicable to the group's parent company when it is situated in Spain and obtains income from its foreign subsidiaries that has not been taxed at a minimum rate of 15%.
- Secondary complementary tax: applicable to subsidiaries of the group when they have obtained income from abroad that has not been taxed at 15%.
Upon approval, the bill, once enacted, would have retroactive effect for groups commencing their fiscal year as of December 31, 2023, except with regard to the insufficiently taxed profits rule foreseen in Final Provision 6th of said proposed legislation, which will take effect for tax periods starting as of December 31, 2024.
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