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Tax talk : How the EU's minimum tax affects fashion brands*?

Laws & regulations
Note: The asterisk (*) indicates that the mentioned requirement or condition applies exclusively to companies with an annual revenue exceeding 750 million euros.

Running a fashion brand is all about staying on top of trends, right? New collections, killer marketing campaigns, that perfect Instagram aesthetic...

But what about the not-so-glamorous side of things?

Taxes, anyone?

The EU's new minimum corporate tax might seem like a wrinkle you didn't see coming. Now, we get it – taxes aren't exactly the most exciting topic. But hear us out! We'll explain what the minimum tax is, who it applies to, and why it might actually be a win for your fashion brand.
What is the minimum corporate tax?

Imagine a global playing field where everyone pays at least a certain amount in taxes.That's the idea behind the minimum corporate tax. Agreed upon by 137 countries, this new rule ensures large multinational companies (those with revenues exceeding €750 million) pay a minimum effective tax rate of 15%. This levels the playing field for businesses operating across borders and helps prevent tax havens from offering overly attractive (and potentially unfair) tax breaks.

Who does this apply to?

This applies to any large fashion group, both domestic and international, with a combined global revenue exceeding €750 million. This includes the financial arms of fashion houses as well. Smaller businesses and non-profit organizations are exempt.

How does it work?

Companies calculate their effective tax rate by dividing taxes paid by their total income. If this rate falls below 15% in any given country, a "top-up tax" is applied to bring the effective rate up to the minimum standard. This applies regardless of whether the country the company operates in has signed on to the agreement.

What does this mean for you?

Transparency and responsible tax practices are becoming increasingly important for fashion brands. By complying with the minimum corporate tax, you demonstrate financial responsibility and commitment to fair play. This can be a major advantage for your brand image, especially with today's conscious consumers.

In a major step forward for global tax fairness, the EU has become a frontrunner in implementing the new minimum corporate tax. This is great news for fashion brands that operate across borders, as it creates a more level playing field and reduces the pressure to chase after lower tax rates in certain countries.

The EU legislation emphasizes stability and fairness within the tax environment. This aligns perfectly with the fashion industry's constant push for innovation and long-term growth. By complying with the minimum tax requirements, your fashion brand demonstrates its commitment to responsible business practices and contributes to a healthier global tax system.

Beyond compliance: An opportunity

The minimum corporate tax can also be an opportunity to streamline your tax practices and potentially reduce your overall tax burden by ensuring you're not paying more than necessary in certain jurisdictions. Additionally, a focus on responsible tax practices can attract investors and partners who share your values.

Staying informed about these evolving regulations is crucial for fashion businesses. We offer tailored services to assist your business every step of the way. From conducting thorough risk assessments to staying informed on the latest EU laws & regulations, we provide expert guidance to help you achieve transparency and compliance. Check out our service page to learn how we can HELP YOU! [Link to the service page]

References :
https://taxation-customs.ec.europa.eu/taxation/corporate-taxation/minimum-corporate-taxation_en#:~:text=On%201%20January%202024%2C%20ground,active%20in%20EU%20Member%20States
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6712
https://www.coleurope.eu/speech-minimum-corporate-taxation-eu-and-beyond-thomas-gerassimos-director-general-taxation-and

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