Germany has transposed the Global Anti Base Erosion Rules (GloBE) through the Minimum Tax Act, thereby meeting the requirements laid down in Pillar 2 of the OECD and the EU's Minimum Tax Directive. Multinational corporate groups with a consolidated revenue of € 750 million or more must apply the law as early as fiscal year 2024. The provisions governing the determination of a global minimum tax constitute a paradigm shift in international taxation. Pillar 2 links group accounting provisions applying to a multinational corporate group with new tax requirements laid down in the Minimum Tax Act, making interdisciplinary collaboration between tax experts, group accounting and accounting experts imperative.
Our tax experts will be glad to assist you in the successful application of global minimum taxation in your corporate group and work with you to find ways to reduce the complexity of the directive, e.g. by skilfully applying safe harbour provisions (CbCR Safe Harbour).
In the implementation of minimum taxation, you can rely on a team consisting not only of tax experts, but also experts in corporate group accounting. Thus, we combine the two key areas for Pillar 2 in one interdisciplinary team. This is an ideal combination in the quest to develop sustainable and customised solutions for your company in the context of global minimum taxation.
Our interdisciplinary team has tax experts and corporate group accounting specialists with a wealth of experience who can provide you with tailored advice on all issues revolving around the global minimum tax.
With dhpg at your side, you can be sure that your minimum tax report and your minimum tax return meet Pillar 2 and national Minimum Tax Act requirements.
The term global minimum tax is self-explanatory. Through our international partner CLA Global, we are present with 14,000 specialist colleagues in over 200 offices. One phone call is all it takes to answer any questions you may have about Pillar 2.
Would you like to meet personally to discuss Pillar 2 and how to meet the requirements set out in the Minimum Tax Act? We would be glad to arrange an appointment with you - no strings attached - so you can get to know us. We look forward your giving us a call or sending us an e-mail and meeting you.
Domestic business units (companies and permanent establishments) that are part of a multinational corporate group and that have generated consolidated sales of € 750 million or more in at least two of the previous four fiscal years are subject to the German Minimum Tax Act.
The primary supplementary tax applies to the ultimate parent company and hence the parent company that prepares the consolidated financial statements in Germany. If the fiscal year coincides with the calendar year, 2024 is deemed to be the first year of application in temporal terms.
For all business units, in particular subsidiaries of foreign corporate groups which are not already subject to primary supplementary tax, secondary supplementary tax may be applicable under the act if additional conditions are met. This only applies beginning in 2025, however.
The basis for determining the effective tax rate is the net profit or loss for the year prior to consolidation adjustments based on accounting data for the respective business unit for consolidation purposes and adjusted to uniform Group recognition and measurement rules (corresponding to commercial balance sheet II). From a German perspective, this would be the German Commercial Code (German GAAP - HGB) or IFRS in the case of the primary supplementary tax.
Data from the country-by-country report serves as the basis to apply (CbCR) safe harbour rules provided for by law, such as the simplified materiality test, the simplified effective tax rate test and the substance test. Extensive data collection, such as for determining minimum taxable profit (GloBE income or loss), is not required for the particular safe harbour. As a result, the new act elevates the importance of CbCR.
Consolidated financial statements often contain accounting options under commercial law that are not necessarily exercised, for example with regard to a possible positive balance of deferred tax assets at the level of commercial balance sheet II. As recognition of deferred taxes directly impacts the effective tax rate of a business unit, it is worthwhile performing a deep-dive analysis of the recognition of deferred taxes in the consolidated financial statements for 2023 with a view to Pillar 2.
Each business unit subject to tax under Section 1 of the Minimum Tax Act (MinStG) must submit a minimum tax report for the fiscal year to the German Federal Central Tax Office (Bundeszentralamt für Steuern). If there are several business units in a multinational corporate group that are taxable under Section 1 of the Minimum Tax Act, one of these business units may submit the minimum tax report on behalf of the other business units. The minimum tax report must be filed no later than 15 months after the end of the fiscal year. The deadline is 18 months for first-time filings. The report is to be transmitted electronically and based on the officially required data set. The following content for the minimum tax report (Section 76 MinStG) is stipulated by the Act:
Generally speaking, all taxable business units in a multinational group located in Germany must file a minimum tax return with the local tax office in charge. The obligation to file a minimum tax return applies in addition to the obligation to file a minimum tax report. If the ultimate parent company of the corporate group is located in Germany, the obligation to file a minimum tax return no longer applies for all the other business units in Germany when the minimum tax return is filed for this parent company.
Implementation of the requirements set out in the Act on the Global Taxation of Companies poses numerous challenges for enterprises. In particular, determining the effective tax rate per country is a complex matter, as numerous specific calculation rules apply in determining minimum taxation both when calculating adjusted covered taxes and minimum taxable income (GloBE income). Several hundred data points are required to comply with these rules. For large corporate groups with many foreign affiliates, the number of data points can extend well into the four-digit realm. This may involve data that is not collected nowadays in some cases - or is at any rate stored at different places within a corporate group and in different IT systems that are often not fully integrated. Our experts will be glad to support you in determining the data points required to calculate the global minimum tax for your company and will be there to answer any questions you may have about Pillar 2.
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