More than 130 countries have set a 15% minimum tax on multinationals. The goal is to limit tax optimization, especially for digital giants.
Emmanuel Macron praised a historic deal. After tough negotiations under the OECD, more than 130 countries and territories agreed to levy at least 15% tax on multinational companies. But what will change in this international tax treaty?
- Which countries are signatories?
It brings together 136 countries and autonomous regions that represent 90% of world GDP, including France, the United Kingdom, the United States, China, India, Japan and Russia. It was a late rally in Ireland, Hungary and Estonia that until then had been reluctant to put their initials into the text, which unlocked the talks. There are also areas that are considered tax havens, such as Jersey, Bermuda or the Cayman Islands.
Of the 140 countries and territories involved in the talks, only four are missing: Kenya, Nigeria, Sri Lanka and Pakistan. In addition, some 60 countries did not participate in the talks. Posted by OECD A map that identifies the countries involved.
- What is the minimum tax?
All countries concerned have agreed to set a minimum tax rate of 15% for companies with a turnover of at least 750 million euros. In addition, a state can tax the foreign profits of one of its national companies, which will be taxed at less than 15% to make up the difference. The goal is to deploy national taxes to limit tax optimization by multinational companies.
These 136 countries and territories are expected to generate an additional 150 150 billion in revenue from 2023.
- On what basis is this tax calculated?
The reform is aimed at, after all, multinational companies that choose a local entity for purely economic reasons – like the American digital giants in Ireland. Compensation laws will also be enforced to avoid penalizing companies that carry out “real” activities – and there are concerns that the corporate tax rate is only 9% to protect the tax attraction of countries like Hungary.
In detail, companies can deduct the tax base of their salary from real assets such as stocks or instruments. For ten years, companies can avoid an amount equal to 8% of the value of the actual assets and 10% of the salary: beyond that, this rate will be reduced to 5% in both cases.
- How will the profits be distributed among the states?
The other pillar of this international tax reform is the new distribution of “taxable rights”. This gives the impression that 25% of profits will be redistributed to the countries where the company operates if profits exceed 25% – one is talking about “surplus profit”. The goal is to redistribute to the states a portion of the profits made by the very large multinationals on their soil, but sometimes evaporated through the tax optimization game.
To benefit from this measure, the company must have a turnover of at least one million euros per state, or 250,000 euros if the state’s GDP is less than 40 billion euros. It will only affect companies with a turnover of more than 20 20 billion (the limit could be reduced to $ 10 billion after seven years).
- What are the consequences for gaffs in Ireland?
Major American digital companies such as Facebook, Google, Apple and Airbnb chose Ireland to establish their European headquarters, taking advantage of the 12.5% corporate tax rate, one of the lowest in the world. The imposition of a 15% minimum tax is a drastic change for these companies and Ireland: the digital sector, which has enabled the country to experience rapid economic growth for the past twenty years, represents 13% of GDP. 210,000 people.
A short or interim exodus of employers is now more prevalent, with some in Ireland fearing that foreign companies will now be surprised before settling or investing on the island, seeing no particular gains.
- When will the reform take effect?
The goal is to implement the reform by 2023, the time to comply with various national laws. But some questions remain unanswered, such as the ability of the U.S. administration to reform Congress.
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