This week in tax: Germany publishes corporate minimum tax plan
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

This week in tax: Germany publishes corporate minimum tax plan

germany berlin reichstag building german parliament bundestag - Concept piece for power, authority, economy, performance, government, planning and control.

The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.

Germany is pushing ahead with its plans to implement pillar two in 2024 with a draft proposal published on Monday, March 20.

The German government aims to implement safe harbours, including a transitional country-by-country reporting rule, as well as permanent provisions for non-material constituent entities and a qualified domestic minimum top-up tax.

All multinational companies in Germany making more than €750 million ($805 million) a year can expect an effective minimum corporate taxation of 15%. Many of the details of its implementation are going to be discussed, but the plan looks set to strictly follow OECD standards.

This is a major step towards the implementation of pillar two across Europe. It may also help build the groundwork for an EU-wide corporate tax system with its own transfer pricing rules.

Interested parties can submit comments on the draft until April 21. The legislative process will extend into the second half of 2023, but the government hopes to secure final legislation before the end of the year.

EY divisions over ‘Project Everest’ persist

Top figures at EY are still divided over the plan to break up the ‘big four’ firm’s audit and consulting functions, according to a Financial Times report yesterday, March 23.

Julie Boland, US chair and managing partner at EY, told the FT that ‘Project Everest’ may not be salvageable unless the plan is rewritten.

EY hit pause on Project Everest in early March amid claims of ‘infighting’ over the plan, particularly over the distribution of tax services for the audit function and consulting group. The big four firm was set to hold a worldwide vote in November 2022, but this was postponed.

Some partners told the FT that they believe Boland is hostage to a minority of US executives who insist on gaining more resources for the audit business. She has been accused of a conflict of interest because she will lead the global audit group once a split is complete.

In response, Boland said it would be impossible for a small group of executives to derail the process under EY’s governance rules in the US.

Two UK freeports get green light

The UK and Welsh governments have given the go-ahead to two freeports in Wales offering businesses a range of special capital allowances and tax relief.

Prime Minister Rishi Sunak visited one of the new freeports in Anglesey, Wales, yesterday, March 23, promising it will boost economic growth in the area. The UK government estimates that these special economic zones will attract £4.9 billion ($6 billion) in private and public investment.

Companies investing in these ports will have access to tax relief on business rates for five years, stamp duty land tax for three years, and national insurance for up to nine years. At the same time, such businesses will be able to access enhanced capital allowances and simplified customs arrangements.

These freeports are a flagship policy of the Sunak government. The plan is intended to bolster growth post-Brexit in regions across the UK.

Japan and US close to deal on EV tax credits

The US is set to extend electric vehicle tax credits to components provided by Japanese manufacturing companies, The Japan Times reported on Tuesday, March 22.

Japan and the US may be about to reach a historic agreement on EV tax credits introduced as part of the US Inflation Reduction Act of 2022. This breakthrough deal could set a precedent for other trade partners given that there is no free trade agreement between the two countries.

South Korea is also worried about the impact of US tax credits on domestic EV production. Meanwhile, several EU countries including France and Germany have raised concerns about the potential impact of US tax credits on their own car industries.

Many countries fear the EV tax credits will encourage manufacturing companies to move production plants to the US. But this deal may be a sign that the Biden administration is willing to accommodate demands from ally nations to make its tax credit regime more practical for international tax competition.

EU set to launch fresh tax investigations, warns Vestager

EU regulators are likely to open investigations into tax deals between certain European countries and multinational companies, warned European Commission Executive Vice-President Margrethe Vestager in a speech on Monday, March 20.

“Recent court rulings – especially in the Fiat case – have brought clarification over how these investigations can be conducted,” Vestager said. “We are continuing to adapt our approach and target aggressive tax planning more effectively.”

Vestager said the Commission had conducted an inquiry into tax rulings in all EU member states from 2014 to 2018.

“I expect this will lead to new investigations in certain countries,” she said, adding that “more will be launched in the not-so-distant future”.

The European Commission has waged investigations into the tax affairs of high-profile companies such as Apple and Google, only to end up in lengthy court battles. However, the Commission has lost to taxpayers in some crucial cases.

Next week in ITR

ITR will be following up on its coverage of the UN consultation on global tax policy, as well as looking at the UK’s planned introduction of master and local file requirements in April.

We will also be publishing our quarterly PDF issue of ITR. The cover feature takes an in-depth look at the Business in Europe: Framework for Income Taxation initiative.

Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.

more across site & bottom lb ros

More from across our site

As German clients attempt to comply with complex cross-border rules, local advisers argue that aggressive tax authorities are making life even harder
Based on surveys covering more than 25,000 in-house lawyers, the series provides insights into what law firms must score highly on when pitching to in-house counsel
The UK tax authority reportedly lost a case due to missing a deadline; in other news, Canada has approved pillar two legislation
There will always be multinationals trying to minimise tax by pushing the boundaries of their cross-border arrangements, Rob Heferen claimed
HMRC’s attempts to crack down on fraudulent tax relief claims are well-meaning, but the agency risks penalising genuinely innovative businesses, writes Katy Long of ForrestBrown
Argentina, Brazil, Mexico and South Africa are among the countries the OECD believes could benefit from the simplified TP rules
It comes despite an offshore enabler penalty existing in the UK throughout the entire period
It is extraordinary that tax advisers in the UK can offer their services without having to join a professional body. This looks like it is coming to an end, Ralph Cunningham writes
Meet the esteemed judges who are assessing the first-ever Social Impact Awards
The ‘big four’ firm has also vowed to spend more on nurturing junior talent; in other news, Blick Rothenberg has hired a pair of tax partners
Gift this article