New obligations for international and domestic groups - the global minimum tax

The purpose of the Pillar II Directive, which is currently being implemented, is to oblige EU member states to enforce the Global Anti-Base Erosion rules (GloBE rules), a tax reform that establishes a minimum level of taxation for international economic activity.

The new regulations introduce an obligation to verify the application of the effective tax rate (ETR). It means that if a group in a given tax jurisdiction attains an ETR below the level specified in the Directive, i.e. less than 15%, it will be obliged to pay a top-up tax. 

The new regime will apply to component entities of international or domestic groups which, in at least two of the four tax years immediately preceding the tax year, have achieved a minimum group revenue of EUR 750 million. The implementation of the rules at the domestic level entails additional obligations also for Polish subsidiaries with parent entities in a foreign country.

The draft act regulates the taxation of three types of top-up tax:

I. Global top-up tax under Income Inclusion Rule (IIR) – taxation at the level of the parent company (even if a low ETR applies to subsidiaries in other jurisdictions),

II. Qualified domestic minimum top-up tax (QDMTT) – taxation at the level of individual subsidiaries,

III. Global top-up tax under Undertaxed Profit Rule (UTPR) -  taxation at the level of subsidiaries, when the parent company operates in a jurisdiction not subject to the global minimum tax regime.

The draft act is in the opinion stage at present. The act is scheduled to come into force from 1 January 2025.