The European Union is preparing to reassess its minimum corporate tax directive next week in a strategic effort to ease growing trade tensions with the United States.
At a meeting scheduled for Tuesday, EU officials will discuss potential modifications to the bloc’s 15% minimum corporate tax law, which has been in place for less than two years. The talks aim to address U.S. concerns and reduce the risk of retaliatory trade actions from the Trump administration, according to a policy document circulated by Poland and reviewed by Bloomberg.
The EU’s Minimum Tax Directive, introduced in line with a 2021 global tax agreement signed by over 140 countries—including the U.S. under the Biden administration—requires multinational corporations to pay at least a 15% corporate tax rate across all EU member states. However, with President Trump back in office and taking a hard stance on foreign tax treatment of U.S. firms, the EU is considering adjustments to preserve transatlantic economic relations.
Rising Trade Tensions
From the outset of his second term, Trump has opposed the global tax deal. Within his first week back in office, he issued a memo stating that the U.S. no longer considers the agreement applicable domestically. He also directed the U.S. Treasury to develop retaliatory measures against countries imposing what he deems unfair taxes on American companies.
Trump’s administration has labeled the EU’s 15% tax requirement a trade barrier targeting U.S. businesses, raising fears of a new wave of tariff-driven conflicts. In response, EU officials are now exploring ways to soften or clarify the law’s application to U.S. firms, without abandoning the core principles of the directive.
Key Policy Adjustments on the Table
According to the Polish document dated April 24, several proposals are under review. Central to the debate is the Under-Taxed Profits Rule (UTPR), which allows EU nations to levy additional taxes on subsidiaries of U.S.-based corporations if their total tax burden falls below the 15% threshold, both at home and in the EU country where they operate.
This clause, a core concern for the Trump administration, could be modified or temporarily suspended. Currently, companies headquartered in non-EU countries with a statutory corporate tax rate above 20%—such as the U.S., which has a 21% rate—are exempt from UTPR through 2026 under a provision known as the “safe harbor.” EU envoys are now weighing an extension of this exemption or the creation of a more tailored alternative to accommodate U.S. firms beyond that deadline.
Another proposal involves formally recognizing the U.S.’s minimum tax regime—Global Intangible Low-Taxed Income (GILTI)—as equivalent to the EU’s framework. While both systems aim to prevent profit shifting to low-tax jurisdictions, their methods for calculating effective tax rates differ significantly. U.S. officials have called for “coexistence” between the two systems, allowing GILTI compliance to count toward meeting EU requirements.
Diplomatic Balancing Act
The EU has previously resisted U.S. pressure to suspend its minimum tax directive, arguing it is essential for ensuring a level playing field and preventing tax avoidance. But with economic ties under strain due to Trump’s aggressive trade policies, officials now appear more open to compromise.
Businesses on both sides of the Atlantic are urging cooperation, warning that conflicting tax rules could lead to double taxation, reduced investment, and further economic fragmentation.
EU ambassadors are expected to review these policy options by June, potentially paving the way for legislative changes later this year. However, any significant amendment would require consensus among all 27 EU member states—a process that could prove politically complex.
The Bigger Picture
While the 15% minimum corporate tax law was once seen as a landmark in global tax cooperation, its future now hinges on whether the EU and the U.S. can find common ground. With both sides wary of undermining economic competitiveness and diplomatic ties, the coming weeks could shape the direction of international tax policy for years to come.
For now, the EU appears willing to explore flexibility—not to weaken its principles, but to avoid a trade war with its most powerful ally.
