No incompatibility between EU Directive 2022/2523 on Global Minimum Tax and the EU principle of freedom of establishment

With the publication in the Official Gazette of Legislative Decree No. 209 of 27 December 2023, Italy formally implemented the provisions set forth in EU Directive 2022/2523, aimed at reducing situations of tax base erosion and profit shifting to States or territories with a favourable tax regime, through the provision of a global minimum tax (so-called Global Minimum Tax) to be applied to multinational or domestic groups with annual revenues, as resulting from the consolidated financial statements of the parent company, no lower than EUR 750 million in two of the four financial years preceding the current one.

Among other measures, the law provides for a system of compensatory taxation for group companies with an effective taxation level of less than 15%, in the hands of the parent company (so-called Income Inclusion Rule) without any possibility for the taxpayer to prove otherwise, apparently contrasting the principles expressed by the Court of Justice of the European Union in the notorious Cadbury Schweppes ruling (C-196/04 of 12.09.2006), which established the legitimacy of the decision regarding Controlled Foreign Companies (CFCs) only on the grounds that it affects merely artificial structures; this latter provision is not present in the Directive under consideration.

In order to remedy this drawback, the EU Legislator has therefore extended the scope of the rule also to domestic groups with no presence abroad, excluding any possible incompatibility of the provision with the principle of freedom of establishment set out in Article 49 of the Treaty on the Functioning of the European Union (TFEU), in no manner representing a disincentive to the international development of companies.

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