Pillar 2 Global Minimum Tax Implementation Advances
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Latvia: Parliament approved the Law on Ensuring a Global Minimum Tax Level for Large Enterprise Groups, partially implementing the Pillar 2 rules in accordance with Latvia’s decision to delay the application of the main rules, including the income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR).
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Luxembourg: The Government Council approved a draft law amending the Law of 22 December 2023, which introduced the Pillar 2 IIR and UTPR, to incorporate the latest administrative guidance issued by the OECD in 2023.
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Singapore: The government launched public consultations on draft legislation for the introduction of the Pillar 2 global minimum tax, including the application of a domestic top-up tax (DTT) and the IIR, effective for financial years commencing on or after January 1, 2025.
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Lithuania: Parliament approved Law No. XIV-2680, partially implementing the Pillar 2 rules in line with Lithuania’s decision to defer the application of the main rules, and a draft order on related notification requirements was issued.
Tax Policy Strategies and Reforms
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Bangladesh: The National Budget Speech for 2024-25 includes changes to individual and corporate tax rates, such as maintaining tax-free income thresholds for individuals, introducing a new top bracket rate of 30%, and adjusting corporate tax rates for non-publicly traded companies, One Person Companies, and cooperative societies.
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Egypt: The Ministry of Finance is finalizing the tax policy strategy for 2024 to 2030, which includes drafting a new corporate tax law and considering the introduction of a 15% minimum tax for multinationals and a Qualified Domestic Minimum Top-up Tax (QDMTT).
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Portugal: A parliamentary committee approved a proposal for the revision of personal income tax bracket thresholds and rates, including adjustments in upper bracket thresholds and reductions in the first six rates.
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Slovenia: The Ministry of Finance published draft bills on amendments to the Corporate Income Tax Act, the Income Tax Act, and the Value Added Tax Act, proposing various measures such as simplifying interest deduction limitation rules, introducing a five-year limit on the carry forward of tax losses, and increasing the VAT registration threshold.
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New Zealand: The Taxation (Budget Measures) Act 2024 was enacted, introducing tax relief measures for individuals, such as an increase in the first three individual income tax bracket thresholds and an increase in the eligibility threshold for the independent earner tax credit, effective from July 31, 2024.
Tax Incentives and Exemptions
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Georgia: A law was introduced providing tax exemptions for the transfer of assets to Georgia from foreign enterprises registered in countries with preferential taxation, subject to certain conditions.
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Denmark: The government announced a new strategy to support entrepreneurship and start-ups through tax cuts and beneficial changes, such as abolishing the taxation of dividends from unlisted portfolio shares and increasing the limit on deducting losses carried forward.
Tax Compliance and Reporting Requirements
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Algeria: New beneficial ownership register requirements were introduced through Executive Decree No. 23-429, requiring Algerian legal entities to submit information on individuals holding at least 20% of the share capital or voting rights or exercising control over the entity.
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Poland: The President signed an amendment to the VAT Act extending the deadline for the mandatory use of the National e-Invoicing System (KSeF) from July 1, 2024, to February 1, 2026, with plans to phase in the requirement based on sales thresholds.
Insights:
The tax policy updates this week highlight the ongoing efforts by governments worldwide to implement the Pillar 2 global minimum tax rules, align their tax systems with international standards, and introduce targeted reforms to support economic growth and enhance tax compliance.
The progress in the implementation of the Pillar 2 rules in Latvia, Luxembourg, Singapore, and Lithuania demonstrates the increasing momentum behind the global adoption of the minimum tax framework. As more countries take steps to introduce or amend their legislation in line with the OECD’s guidance, it becomes evident that the Pillar 2 rules are set to reshape the international tax landscape significantly.
The tax policy strategies and reforms announced in Bangladesh, Egypt, Portugal, and Slovenia reflect the diverse approaches taken by governments to adapt their tax systems to evolving economic circumstances and address specific challenges. These reforms often involve adjustments to individual and corporate tax rates, as well as targeted measures to simplify tax rules, encourage investment, and promote fairness.
The introduction of tax incentives and exemptions in Georgia and Denmark highlights the role of tax policy in attracting foreign investment, supporting specific sectors, and fostering entrepreneurship. By offering targeted relief measures, governments aim to create a more conducive environment for businesses to thrive and contribute to economic growth.
Last but not least, the focus remains on tax compliance and reporting requirements, as evidenced by the developments in Algeria, and Poland.
