EU Directive on Global Minimum Level of Taxation for MNE

Our tax Partner Nikola Đorđević will attend the 75th Congress of the International Fiscal Association, to be held from 22 October until 26 October in Cancun, Mexico.

IFA is a truly global association of tax experts with over 12,500 members from 114 countries and IFA Branches in 70 countries, and the IFA annual congresses are an excellent opportunity to share experiences and #newdevelopments with tax professionals from around the globe.

As the announcement of the congress, our colleagues Nikola Đorđević and Staša Kneselac have prepared an overview of the effect that the Council Directive (EU) 2022/2523 might have on local tax systems of Serbia and Montenegro, the corporate income tax of which is on the verge of being considered as low-taxed jurisdictions.

The New Directive is establishing a global minimum corporate tax rate of 15% for large multinational enterprises (MNEs). This is intended to prevent profit shifting to low-tax jurisdictions.

The corporate tax rates in Serbia (15%) and Montenegro (9-15%) are below the 15% minimum rate set by the EU Directive. This means MNEs with entities in these countries could be impacted and have to pay additional top-up tax.

The Directive only applies to large MNEs meeting a EUR 750 million revenue threshold. Smaller local companies in Serbia and Montenegro are not directly affected. However, Serbia and Montenegro may need to reconsider some of their tax incentive policies like the 10-year tax holiday in Serbia in order to align with EU rules and remain an attractive location for foreign investment.

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