January 1, 2024 marked the entry into force of the application of the Global Minimum Tax in those countries that incorporated Pillar 2 of Action 1 of the Project against the Erosion of the Tax Base and the Shift of Taxes into their national legislation. Benefits of the Organization for Economic Cooperation and Development (OECD) and the G-20. Among these countries are the member states of the European Union, some of which are relevant commercial partners for the Republic of Panama.
The Community Directive 2022/2523 of the European Union introduces a minimum effective tax rate of 15% (TIE) for those multinational groups with consolidated income greater than 750 million euros per year. This rate will be applied to the parent companies and subsidiaries of multinational groups from the member countries of the European Union that are within the income threshold, provided that their activities comply with the scope of application of said rules. In addition, the Directive indicates the types of multinational group entities subject to this tax, the income eligible for calculating the tax, and aspects regarding the informative return, among other applicable rules that allow compliance.
In cases where a multinational group from the European Union obtains an effective income tax rate of less than 15% in any jurisdiction where some of its subsidiaries are located, the jurisdiction of the Headquarters will apply a Supplementary Tax (top-up-tax). This means that the Member State of the European Union will collect the difference between 15% and the effective rate paid in the jurisdiction where the income was generated.
In the case of Panama, the impact of the enactment of this new tax by the European Union would be for those subsidiaries or affiliates resident or with a physical presence in the country, belonging to a multinational group that reaches the income threshold and whose head office is located in a Member State of the European Union. When the consolidated effective rate of Income Tax at the jurisdictional level of the Panamanian subsidiaries of these groups does not reach the minimum of 15%, the multinational group must pay the difference in the country of its parent company or where appropriate according to the “GloBe” rules. ".
This is particularly relevant for preferential tax regimes such as Multinational Enterprise Headquarters (SEM), Panama Pacific Special Economic Area and City of Knowledge due to the presence of multinational groups with headquarters in countries such as Germany, Spain, France, Luxembourg, among other Member States of the European Union. For these groups and their subsidiaries in Panama, the Global Minimum Tax is already a reality, which is why they have begun coordination work with their European headquarters for its compliance.
The jurisdictional effective rate will also consolidate activities that generate income from foreign sources for multinational groups with subsidiaries or affiliates within the scope of application, so it is not enough to review the regimes with reduced rates but also the effects of the activities that They are carried out from, for example, the Oil Free Zones, the Colón Free Zone and the different Free Zones.
The reality
This article is based on the one published by Galindez - Medrano & Associates at prensa.com.