Keywords: G7, Global Minimum Corporate Tax, Tech Companies

The G7 countries have reached an outline agreement on a global minimum tax for companies. This will finally give European countries more rights to tax American tech companies like Facebook and Amazon, for example. The agreement also puts a minimum under corporate taxes worldwide. The minimum tax rate has supposedly been agreed on 15% for now[1].

The finance ministers of the United Kingdom, France, Italy, Japan, Canada, Germany and the United States met in London to discuss the White House plan for an international minimum tax rate. The agreement will end transatlantic tensions that for years undermined negotiations between some 140 countries, over updating centuries-old tax rules[2].

The aim of the agreement is to prevent large companies from shifting profits to other states to avoid paying taxes, for example through so-called letterbox companies. This is because the companies must pay more tax in the countries where they operate. What kind of tax implications the agreed global minimum tax rates will have on national tax systems will have to be seen. For example what kind of effect will the minimum rate of 15% have on the Dutch subject-to-tax test[3] for the application of the participation exemption that is currently set on a minimum of 10%? Will this minimum also be raised to 15%?

Many technical details still need to be decided on in the coming weeks, the G7 signalled earlier. On Friday, a breakthrough was already reached on how to distribute the proceeds from taxing tech companies. The G7 also agreed to the principle of a global minimum corporate tax rate for large companies of at least 15 percent. The measures will also help crack down on tax evasion. This has always proved difficult until now, as the US did not want to distinguish between digital companies and other companies in new rules. From Europe, however, there was a desire to tackle tech companies explicitly. A final agreement may not be reached until this autumn, also because some countries must first adopt national laws.

The Netherlands is known as a country where many companies evade taxes through letterbox firms. In a March report by the organization Tax Justice Network, the Netherlands was still prominently mentioned. Only the British Virgin Islands, Cayman Islands and Bermuda play a bigger role in tax avoidance than the Netherlands, according to the organization.

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[1] IBFD. (2021, 7 juni). G7 Finance Ministers Agree on Global Tax Reform; 15% Minimum Tax Rate. IBFD - Tax Research Platform.

[2] Taxlive. (2021, 6 juni). Akkoord wereldwijd minimumtarief VPB van 15 procent | TaxLive.

[3] Article 13 paragraph 11 section a CITA



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