On May 19, 2022 Members of the European Parliament (Hereafter MEPS) approved the European Commission’s Proposal for a Council Directive on ensuring a global minimum level of taxation for multinational groups in the Union. The report, authored by Aurore Lalucq (S&D, FR) was adopted by by 503 votes in favour, 46 votes against and 48 abstentions.


The text adopted by MEPs approves the key elements of the Commission’s proposal, notably sticking to the proposed implementation timeline and an implementation deadline of December 31, 2022 with the intention of a swift application of the law.


MEPs did however make changes to the Commission’s proposal. In particular they introduced a review clause which provides for the revision of the annual revenue threshold above which a multinational corporation would be subject to the minimum tax rate. MEPs also want an assessment on the impact of the legislation on developing countries.


Introduction of a new Article 4a

Furthermore MEPs seek to reduce certain exemptions proposed by the Commission, and to limit the possibility for abuse of the rules, notably by introducing a specific article containing rules to fight tax avoidance schemes. The newly introduced article containing rules to fight tax avoidance schemes reads as follows:

Article 4a - Anti-avoidance rules

1.    For the purposes of calculating the top-up tax, Member States shall disregard any arrangement or series of arrangements which, having been put in place for the essential purpose of obtaining a tax advantage that defeats the object or purpose of this Directive, is not genuine, having regard to all relevant facts and circumstances. An arrangement may comprise more than one step or part.

2.    For the purposes of paragraph 1, an arrangement or a series of arrangements shall be regarded as non-genuine where it is not put in place for valid commercial reasons that reflect real economic activities.

3.    An arrangement or a series of arrangements that is disregarded in accordance with paragraph 1 shall be treated, for the purpose of calculating the tax base, by reference to its economic substance.

4.    The Commission is empowered to adopt delegated acts in accordance with Article 52 in order to lay down more detailed rules against tax avoidance, in particular to take into account future modifications of the GloBE Model Rules.”


Amending periods

Furthermore the adopted report a.o. contains several amendments of periods mentioned in the Commission’s original proposal. A few examples are:


Article 10, Paragraph 3 (Election to apply a qualified domestic top-up tax)

Where the amount of qualified domestic top-up tax taken into consideration in the computation of the jurisdictional top-up tax in accordance with Article 26 for a fiscal year has not been fully paid within the three following fiscal years, the amount of domestic top-up tax that was not paid shall be added to the jurisdictional top-up tax computed in accordance with Article 26(3).


Article 21, Paragraph 7 (Total deferred tax adjustment amount)

A deferred tax liability that is not paid or reversed within the five three subsequent fiscal years shall be recaptured to the extent it was taken into account in the total deferred tax adjustment amount of a constituent entity.


The amount of the recaptured deferred tax liability determined for the fiscal year shall be treated as a reduction to the covered tax of the fifth third preceding fiscal year and the effective tax rate and top-up tax of such fiscal year shall be recomputed in accordance with Article 28(1).


Article 31, Paragraph 4 (Application of the consolidated revenue threshold to group mergers and demergers)

Where a single MNE group demerges into two or more groups (each a “demerged group”), the consolidated revenue threshold shall be deemed to be met by each demerged group for at least six years following the demerger if it reports:

(a)   an annual revenue of EUR 750 000 000 or more in the first fiscal year after the demerger; and

(b)   an annual revenue of EUR 750 000 000 or more in at least two of the second to fourth consecutive fiscal years after the demerger.


Article 47 (Exclusion from the IIR and UTPR of MNE groups in the initial phase of their international activity)

The five-year period in Article 47 is replaced by a three-year period.


Proposed new Article 42, paragraph 2, subparagraph 2 a

Another interesting proposed amendment is the introduction of a new sub-paragraph to Paragraph 2, of Article 42 (Filing obligations). The proposed new sub-paragraph reads as follows:” Where no constituent entity has been appointed by other constituent entities of the MNE group, the designated local entity in charge of filing the top-up tax information shall be the largest entity of the MNE group located in the same Member State in terms of annual revenues for the last two consecutive years.”


The adopted text, including all the proposed amendments can be found here.



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