Setting the scene
In 2024, the OECD’s Global Minimum Tax (GMT) was widely implemented, introducing the Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT), as several countries began transposing the Global Anti-Base Erosion (GloBE) Model Rules – also known as Pillar Two rules, into their domestic laws. Even jurisdictions that did not implement GloBE rules started to adopt or align their corporate taxes with the GMT.
Starting 2025, the Undertaxed Payments Rule (UTPR) – acting as a backstop to the IIR to ensure the minimum taxation is reached, takes effect in some countries. Calculating whether a company is undertaxed can turn out to be a long and complex exercise.
What is the position of the US?
In the meantime, the United States, led by President Trump, strongly opposed the GMT. One of his first executive orders denounced the GMT agreement, asserting that it holds “no force or effect” within the US. Along with that decision, the “Defending American Jobs and Investment Act” was introduced to Congress, aiming to impose a tax increase of up to 20% on the US income of individuals and entities located in foreign countries with designated inequitable taxes like the UTPR or digital services tax (DST).
The implications of the US position on the future of the GMT remain uncertain. It’s unlikely that the US will change its rules to align with GloBE. However, the GMT is in effect in the EU, and other countries show ongoing support.
Can we expect a GMT system without the US in the future to meet its demands? Considering that this may take years and require extensive negotiations
As countries move forward with the implementation of the GloBE rules, the Inclusive Framework ensures coordination of their actual application. This includes a peer review process that provides certainty for countries implementing the rules and for multinational groups. On 15 January 2025, the OECD published an administrative guidance that includes a Central Record of Legislation. This document shows which countries have successfully completed the necessary steps to secure a qualified status for the IIR, DMT, or QDMTT Safe Harbour.
Tax filings for GMT purposes
Back on 28 October 2024, the European Commission adopted the DAC 9 proposal which aims to streamline tax filing requirements for companies under the Minimum Tax Directive. This proposal creates a system for tax authorities to exchange information and introduces a standardized form that aligns with the OECD’s development. It also enables the Commission to quickly update this form to stay in sync with the OECD’s information return. While a consensus has not yet been reached, there is optimism about finalizing the DAC 9 approval soon. Member States will have to transpose it by 31 December 2025.
Our take
The journey toward implementing these new tax rules is not without its challenges, especially with varying levels of support from different countries. In this context, understanding the implications of the GMT and the ongoing development in global taxation is crucial for businesses and policymakers alike. Despite US opposition, the GloBE rules are implemented in the EU and in other countries. Companies should keep working to anticipate the impacts of these rules to prevent compliance costs spiraling out of control. The future of global taxation is complex and filled with challenges. It is hoped that countries will collaborate to create a more equitable and transparent tax system for a fairer global economy. Multinationals should keep modeling, planning, and preparing for GloBE compliance. Those that do not prepare risk extra top-up taxes, double taxation, and increased reporting requirements.
EY Luxembourg Partner, Tax Leader
, EY Luxembourg Senior Manager, International Tax and Transactions Services
H.R. 591.
Council Directive (EU) 2022/2523 of 14 December 2022