Peter Barnes Comments on Global Minimum Tax in Bloomberg

The new 15% global minimum tax that became effective in almost 40 countries is barely having an impact on many of the 100 largest US companies so far, but it has prompted low-tax jurisdictions to raise their corporate tax rates.

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Under the global minimum tax rules, the US GILTI rate is “pushed down” from the parent entity to the subsidiaries operating in foreign countries with tax rates below 13.1%. In effect, the push-down rule lowers the amount of top-up tax a company pays.

However, these rules only apply to tax years 2024 and 2025.

Peter Barnes, Of Counsel at Caplin & Drysdale, said U.S. companies won’t be hit with large global minimum tax bills because they’re already getting taxed well above 15% in their top foreign markets.

Barnes pointed to countries in Europe, as well as the UK, Japan, Australia, and China that have corporate tax rates at or above 20%. The EU, UK, Japan, and Australia have each adopted the Pillar Two rules.

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Where companies may feel the sting, Barnes added, is in traditionally low- or no-tax jurisdictions like Ireland and Singapore that have adopted or will adopt global minimum tax rules.

“There may be real revenue there, but other than that, I don’t think there’s going to be a lot of sort of new revenue flowing into a lot of countries,” he said.

For the full article, please visit Bloomberg Tax’s website (subscription required).