Taxation of multinational companies

To combat tax dilution by multinational companies (hereinafter - MNCs), the OECD has formed the Global Tax Deal, which consists of two components. The first pillar (Pillar 1) stipulates that large MNCs, especially digital MNCs, must pay taxes in the countries where their customers are located, even if they do not have a physical presence in those countries. The second pillar (Pillar 2) sets the Global Minimum Tax (GMT) on corporate income at 15% for MNCs. (In Monitoring No. 10, we described how the GMT works).

More than 50 countries have already implemented or are planning to implement GMT, with GMT being introduced in Brazil from January 2025. However, in January 2025, the United States announced that it does not recognize GMT for MNCs with headquarters in the United States.

The US experience

In January 2025, the US Presidential Memorandum on the OECD Global Tax Deal was released. The document is directed against the levying the GMT on US companies, in particular against the levy rules on under-taxed¹ income of multinationals. This rule allows countries to levy an additional tax on multinationals (particularly US) if their tax rate in another country is below 15% (the size of the GMT). This compensates for the missing tax revenue if the country where the income is earned does not bring the tax to the 15% level proposed by the OECD.

As a follow-up to the Memorandum, a bill entitled “Protecting American Jobs and² Investment Act” was introduced aimed against extraterritorial taxes imposed by foreign countries on U.S. citizens and companies (including against countries that impose the GMT). The U.S. Treasury Department must regularly report on such taxes and then seek their elimination through bilateral negotiations. If a country fails to eliminate such taxes, retaliatory measures may be introduced, including higher taxes on that country's citizens and companies, as well as trade restrictions.

The experience of Brazil

From January 1, 2025, Brazil applies the OECD GMT in the form of an additional levy to³ the social tax on net income for multinationals with revenues over €750 million. While the previous rate was 9%, foreign multinational companies will now pay an additional 6% on Brazilian income to reach the minimum GMT rate of 15%.

Russia’s experience

As early as December 2024, the Russian Finance Ministry released a statement that in mid-2025 a decision will be made “on the need to fine-tune national legislation” in connection with Pillar 2, and if “in 2024 a company paid tax from the Russian tax base outside of Russia”,⁴ “countermeasures” will be taken. The statement suggests that the Russian Ministry of Finance may follow a similar approach to the United States when it comes to the implementation of Pillar 2: not implementing GMT and not recognizing the rights of other countries to levy it on Russian companies.

From the monitoring issue No. 1 (13), January 2025. Download the full issue (PDF) · issue page at the Gaidar Institute