On 28 July 2023, the Luxembourg Council of Ministers adopted a bill transposing the EU Directive on global minimum tax into the country’s domestic tax law.
In December last year, EU member states agreed on a Directive to ensure a global minimum level of taxation for multinational enterprises (MNEs) and large domestic groups within the EU. The global minimum tax rules are broadly based on the OECD’s Pillar Two rules, or GLoBE.
More specifically, the tax rules provide for a coordinated system of taxation that imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum rate set at 15 percent. The rules would apply to multinational enterprises (MNEs) with a consolidated turnover of at least EUR 750 million and large domestic groups in the EU.
In order to implement the effective global minimum tax of 15 percent, the draft bill provides for the introduction, in Luxembourg law, of two new taxes which are based on the application of two inter-dependent rules, namely, the income inclusion rule (IIR) and the undertaxed profits rule (UTPR). The bill also includes a qualifying domestic top-up tax (QDMTT).
The bill will now be tabled in the Chamber of Representatives (chambre des députés) for approval. The deadline for transposition of the EU Directive into national law is December 31, 2023.