Minimum levy of 15% on multinationals

The government is to impose an additional 15% tax on multinational companies and their subsidiaries operating in Greece with annual revenues exceeding 750 million euros.

National Economy and Finance Minister Kostis Hatzidakis presented the new framework to the cabinet on Tuesday and in the coming days this is expected to be submitted to Parliament for a vote. Essentially it is the implementation, at the European Union level, of the minimum taxation arm, known as Pillar Two, of the Organization for Economic Cooperation and Development’s international tax reform. 

In total, according to OECD estimates, the annual loss of revenue for the tax authorities from the practices of the multinationals amounts to at least $150 billion, or about 6% of the revenue of the states from corporate income taxation worldwide.

In Greece, 2022 data show there are 19 Greek business groups and 900-950 subsidiaries of foreign groups with a consolidated turnover exceeding €750 million.

The draft law intends to put an end to the tax practices of multinationals, which are currently allowed to shift their profits to countries with zero or very low taxes. A set of international tax rules is created to ensure that such businesses pay taxes wherever they operate. The application of this rate can lead to additional tax revenue of up to 15% on profits, if these companies paid less than this in tax.

To date this has been adopted by 132 countries and is mandatory from January 1, 2024 for EU member-states. Therefore, both multinational business groups and large-scale national groups with an annual turnover of more than €750 million should be taxed at a minimum effective tax rate that cannot fall below 15%.

From the application of the minimum rate in Greece and internationally, the following are excluded: international organizations, nonprofit organizations and pension funds.

Hatzidakis stated: “Our country incorporates into its national law the European directive that introduces an additional tax of up to 15% on those multinational companies and large groups that pay lower taxes for unfair reasons tax competition. The use of unfair practices is what the European Union seeks to address, and Greece is incorporating this directive not only for reasons of institutional obligation, but also for reasons of tax justice.”