In December 2022, the OECD Inclusive Framework on BEPS published a set of Global Anti-Base Erosion Model Rules for the implementation of a global minimum tax (Pillar II) followed by the EU Commission’s proposal for a corresponding Council Directive, which was agreed upon by the EU member states on December 15th/16th, 2022, which shall become effective for fiscal years starting on January 1st, 2024. Moreover, non-EU member states have already announced that they will implement the global minimum tax on domestic basis to become effective in 2024 as well. Some states have started a public consultation process, and some have already published draft legislation. The general approach of the OECD and EU Model Rules is to identify low-taxed jurisdictions in which the operations of a multinational group are taxed at an effective tax rate that is below the agreed minimum tax of 15 percent. As a principle, an income inclusion rule requires that the top-up tax in general be collected at the level of the ultimate parent entity. Income and taxes to be allocated to a group’s constituent entities have to be calculated based on the financial accounting net income or loss rather than on a tax basis. A constituent entity may be either a subsidiary or any permanent establishment of a main entity. The latter shall be treated separately from the main entity and any other permanent establishment of the main entity. This requires multinational groups to maintain actual or notional permanent establishments in other states to compute the effective tax rate of a permanent establishment for global minimum tax purposes based on financial accounting standards, which in many cases currently are legally neither required nor available. Stefan Bendlinger analyzes the impacts of the Model Rules on multinational groups carrying on business in the source sate through a permanent establishment situated therein.
