GloBE rules and minimum taxation after the December 2022 EU-ECOFIN meeting

By Niels Webersinn, nbs partners

From a tax perspective, the end of 2022 in Europe resembled a highly exciting high-noon duel. Even after the United States launched an atomic tax bomb by terminating its joint double taxation agreement with Hungary, Hungary maintained its refusal to implement the global minimum taxation rules as per the EU directive. The 06 December 2022 meeting of the EU Council of Finance Ministers (ECOFIN) also did not result in any change.

A positive vote in Hungary on the EU minimum taxation directive was only accomplished after other EU member states agreed that Hungary would not completely forfeit all EU payments for the coming years due to its lack of anti- corruption measures, and they would keep a part in reserve should Hungary change its mind regarding anti-corruption rules.

A new duellist then appeared on the scene in the form of the Polish government, which attempted a standoff with the EU in a similar way to Hungary, but met with only partial success.

With positions changing almost by the hour, only the last EU Council of 2022 brought about a breakthrough and the EU directive for the implementation of the global minimum taxation was adopted. This now must be implemented in national law in all EU states after the EU legislative process has taken place. In addition to the EU member states, Switzerland and the United Kingdom are also planning to implement minimum taxation so that, in the view of the OECD, a critical mass of states with corresponding economic weight will implement the OECD proposal.

Effective 01 January 2024, a new tax procedure will force large corporate groups to incur more tax expense, and establish a new administrative procedure for filing in accordance to the GloBE rules. For the beginning of 2023, the OECD has initiated consultation processes for the simplification of the GloBE rules. It will be interesting to see how much effort and costs this taxation and filing process will trigger. In Germany alone, it is assumed that at least 750 companies will be affected unless sales thresholds are adjusted downwards. One-off costs of EUR 360 million are expected, and at least EUR 150 million in ongoing costs.

These estimates show what kind of administrative effort is being triggered for companies. During this period of transition, we have the opportunity to be mandated in this area as well and not just leave the field to the large firms, as long as we position ourselves to our clients as qualified partners, and take advantage of the possibilities offered by our GGI network. The regulations will not be mysterious witchcraft. It is important to demonstrate our competence in this new field of law and convince our existing clients to work with us.

Niels Webersinn

GGI member firm
nbs partners
Auditing & Accounting, Tax, Law Firm Services
Hamburg, Germany
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nbs partners is a multidisciplinary association of certified public accountants, lawyers and certified tax advisors, with a focus on the audit and advisory of small, mid-sized and large entities, as well as international groups and high-net-worth individuals.

Niels Webersinn is Director for international tax law, asset transfers and agricultural tax law at nbs partners in Hamburg. Niels Webersinn has lived in the USA and France for several years and is therefore familiar with the pitfalls of international tax regulations. He is married and has two kids.

Published: GGI Insider, No. 123, January 2023 l Photo: Jonas Weinitschke - stock.adobe.com