World leaders have agreed to impose a 15% minimum tax rate on multinational enterprises (MNEs) from 2023 and reallocate $125 billion of profits of the world’s largest companies.
- 136 countries and jurisdictions agreed upon the landmark deal covering over 90% of global gross domestic product.
- The deal is supported by OECD and G20 countries, while Kenya, Nigeria, Pakistan, and Sri Lanka have yet to join the agreement.
- The global minimum tax agreement will see countries collect an estimated $150 billion in new revenues annually.
- MNEs with global sales above EUR 20 billion and profitability above 10% will be covered by the new rules, with 25% of the profit above the 10% threshold reallocated to market jurisdictions.
- Pillar One taxes rights on over $125 billion of profits, with developing country revenue gains expected to climb higher than those in more advanced economies.
- Pillar Two will apply the 15% corporate tax rate, applicable to companies with revenue above EUR 750 million and estimated to generate $150 billion in additional global taxes.
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