In today’s world, taxation, apart from its traditional role, is becoming an essential tool in policymaking and is being transformed into a strategic business partner worldwide.
A new framework has emerged, requiring the tax function to be involved in all key operations and play a significant role in contributing to organizations’ growth, not only by ensuring compliance but also by minimizing risks and exposure and maximizing tax opportunities globally.
Whereas in the past, taxation was regulated either locally or through bilateral treaties between countries (which must now be reconsidered), today it is regulated by a new multilayered set of rules, guidelines, policies, and directives that are being enforced worldwide, issued by international organizations—the OECD and EU. These define the new landscape, leading to the harmonization of taxation policies and alignment of rules by implementing tax rates, applied in a uniform tax base, subsequently leading to international audits, moving from local to global.
The key parameter to keep in mind is the €750 million annual consolidated group revenue threshold for multinational enterprises.
Tax entities must adopt the new requirements and ensure global compliance with the new framework while also remaining competitive
With regards to the rates and following the Base Erosion and Profit Shifting (BEPS) actions, the implementation of Pillar II requirements, which were already in place within the OECD and came into effect in the EU on January 1, 2024, introduced a minimum income tax rate of 15% globally; in Greece, the new law is expected to be enacted soon.
Furthermore, with regards to the tax base of groups within the EU, the European Commission recently adopted a new uniform set of rules known as the Business in Europe Framework for Income Taxation (BEFIT), aiming to simplify the process, make business across the Union more competitive, and finally make compliance less costly by establishing one system in place of 27 different national tax systems.
Country-by-country reporting (CbCR), initially an annual reporting obligation, is further developed as a key audit and diagnostic mechanism at the international level, including specific financial and tax data/information, publicly available as of June 22, 2024.
Based on the above, tax audits will be performed not only locally but also internationally and jointly by tax authorities from different jurisdictions as per the Directive on Administrative Cooperation (DAC 7), requiring synergies and the use of digital tools; the relevant framework has already been transposed into Greek tax law.
The targets of the new global framework are indeed ambitious, aiming to address base erosion and profit shifting practices, ensure transparency, and define the substance rules, which are an additional key area of focus for tax authorities.
Tax entities and especially multinational enterprises need to adjust their policies in order to safely adopt the new requirements and ensure global compliance with the new framework, while at the same time remaining competitive.
Authorities need not only to ensure public revenues but also to adapt to the ongoing changes in business models and the global economy and to move toward a substance-over-form approach.
In any event, apart from the alignment and harmonization, which will be a long process requiring additional resources, it is crucial to take into account the timing of the implementation, in order to minimize discrepancies during the intermediate period.
