Global Minimum Tax: A challenge for large groups

WHAT IT IS ABOUT – IN BRIEF

The re­gu­la­ti­ons ad­op­ted at the OECD le­vel for in­tro­du­cing a glo­bal mi­ni­mum tax, which must be trans­po­sed into na­tio­nal law in the EU due to the Mi­ni­mum Ta­xa­tion Di­rec­tive, were im­ple­men­ted in Ger­many with the Mi­ni­mum Tax Act. Groups with a to­tal an­nual tur­no­ver of at least EUR 750 mil­lion in at least two of the four pre­ce­ding fi­nan­cial years are ob­li­ged to check whe­ther the pro­fit of all group mem­bers ba­sed in a ju­ris­dic­tion is sub­ject to an ef­fec­tive ta­xa­tion of at least 15 %. The new ru­les are ap­plica­ble for fi­nan­cial years be­gin­ning af­ter 30 De­cem­ber 2023 – hence for fis­cal years coin­ci­ding with the ca­len­dar year from 2024 on­wards.

If the ef­fec­tive tax bur­den is lo­wer than 15 %, a top-up tax must be paid, usually at the le­vel of the group’s ul­ti­mate pa­rent en­tity. Both mul­ti­na­tio­nal and pu­rely na­tio­nal groups of com­pa­nies are af­fec­ted.

Groups co­vered by the glo­bal mi­ni­mum tax ru­les must carry out ex­ten­sive data ana­ly­ses. The cal­cu­la­tion of the ef­fec­tive tax bur­den re­qui­res de­tai­led data from re­por­ting pa­cka­ges pre­pa­red for the group’s con­so­li­da­ted fi­nan­cial state­ments, which must be supp­le­men­ted by nu­me­rous other data points at the le­vel of the in­di­vi­dual group com­pa­nies.

The in­tro­duc­tion of the glo­bal mi­ni­mum tax is also ac­com­pa­nied by ex­ten­sive ad­di­tio­nal de­cla­ra­tion ob­li­ga­ti­ons do­mesti­cally and ab­road. A glo­bal mi­ni­mum tax re­port must be sub­mit­ted to the com­pe­tent aut­ho­ri­ties in every tax ju­ris­dic­tion in which group en­ti­ties are ba­sed, pro­vi­ded that the re­spec­tive coun­try has im­ple­men­ted the glo­bal mi­ni­mum tax re­gu­la­ti­ons. The glo­bal mi­ni­mum tax re­port com­pri­ses ex­ten­sive fi­nan­cial data and de­tai­led in­for­ma­tion about the group struc­ture, the ef­fec­tive tax rate cal­cu­la­tion in each ju­ris­dic­tion, the ap­plica­bi­lity of ex­emp­ti­ons and de­duc­tions etc.

Group en­ti­ties ba­sed in Ger­many must file such a re­port elec­tro­ni­cally with the Fe­deral Cen­tral Tax Of­fice (for the first time no la­ter than 30 June 2026). Fur­ther­more, coun­tries like Ger­many re­quire an ad­di­tio­nal glo­bal mi­ni­mum tax re­turn ba­sed on which the top-up tax would be le­vied. The top-up tax payable is to be cal­cu­la­ted by the com­pany its­elf (so-cal­led self-as­sess­ment).

RELIEFS THROUGH TEMPORARY SAFE-HARBOUR RULES

Tem­porary safe har­bour ru­les ba­sed on data from well-known Coun­try-by-Coun­try Re­por­ting (tax CbCR) may help to re­duce the ad­mi­nis­tra­tive bur­den in the first up to th­ree years of ap­pli­ca­tion of the glo­bal mi­ni­mum tax. (ge­ne­rally, in the fi­nan­cial years 2024 to 2026). If for a tax ju­ris­dic­tion one of the fol­lo­wing th­ree tests are pas­sed, the top-up tax for the re­spec­tive ju­ris­dic­tion would be nil:

1. Ac­cor­ding to CbCR data, re­ve­nue is less than EUR 10 mil­lion, and pro­fit be­fore tax is less than EUR 1 mil­lion (de mi­ni­mis test).
2. The sim­pli­fied ef­fec­tive tax rate cal­cu­la­ted ba­sed on the CbCR data (along with cer­tain mo­di­fi­ca­ti­ons, par­ti­cu­larly re­gar­ding de­fer­red ta­xes) is at least 15 % (in 2024), 16 % (in 2025), and 17 % (in 2026; sim­pli­fied ETR test).
3. Pro­fit be­fore tax ac­cor­ding to CbCR does not ex­ceed the so-cal­led sub­stance-ba­sed ex­emp­tion, de­ter­mi­ned ba­sed on wage costs and tan­gi­ble as­sets (sub­stance test).

These ex­emp­ti­ons can be ba­sed on data al­re­ady col­lec­ted or re­qui­red for the pur­po­ses of tax CbCR, sub­ject to some mo­di­fi­ca­ti­ons. Howe­ver, the data must ful­fil the re­qui­re­ments of a so-cal­led qua­li­fy­ing CbCR, i. e., the data is drawn from re­por­ting pa­cka­ges pre­pa­red for the group´s con­so­li­da­ted fi­nan­cial state­ment or from the in­di­vi­dual en­tity ac­counts, pro­vi­ded they are pre­pa­red using an ac­cep­ta­ble fi­nan­cial stan­dard, as de­fi­ned in the glo­bal mi­ni­mum tax ru­les.

If the group does not pass any of the th­ree tests for a cer­tain ju­ris­dic­tion in one fis­cal year the CbCR ba­sed safe har­bour ru­les are not ap­plica­ble for this ju­ris­dic­tion in sub­se­quent years (“once out, al­ways out” prin­ci­ple). As­sume, for ex­am­ple, a mul­ti­na­tio­nal group in scope of the glo­bal mi­ni­mum tax has a sub­si­di­ary in coun­try A. For coun­try A the sim­pli­fied ETR is 16 % in 2024, 15 % in 2025, and 18 % in 2026. The re­qui­re­ments of the de mi­ni­mis test and the sub­stance test are not ful­fil­led in these fis­cal years. The CbCR Safe Har­bour ap­plies for coun­try A in 2024, but not in 2025 (“once out”) and not in 2026 (“al­ways out”).

For fis­cal years be­gin­ning af­ter 21 June 2024 (i. e., ge­ne­rally as of fis­cal year 2025) groups with a tur­no­ver of at least EUR 750 mil­lion in two sub­se­quent years must also con­sider new “pu­blic CbCR” ru­les if the ul­ti­mate pa­rent or any other con­sti­tu­ent en­tity is re­si­dent in the EU. In ge­ne­ral, pu­blic CbCR data must be publis­hed in the com­pany re­gis­ter. The re­qui­red data can be drawn from tax CbCR sub­ject to some mo­di­fi­ca­ti­ons.

The struc­tu­red and con­sis­tent de­ter­mi­na­tion of CbCR data is the­re­fore be­com­ing in­cre­asin­gly im­port­ant for groups with an an­nual tur­no­ver of at least EUR 750 mil­lion.

Groups with a tur­no­ver be­low this th­res­hold should also pre­pare them­sel­ves in due time for the chal­len­ges of the glo­bal mi­ni­mum tax, qua­li­fy­ing tax CbCR and pu­blic CbCR, if it is fo­re­see­able that the an­nual tur­no­ver will ex­ceed EUR 750 mil­lion in the next years.

OUR SUPPORT

Groups that are sub­ject to the glo­bal mi­ni­mum tax should fo­cus very promptly on de­ter­mi­ning the ef­fec­tive tax bur­den on group pro­fits in each coun­try the group has sub­si­dia­ries or per­ma­nent es­ta­blish­ments. We sup­port you in ana­ly­sing which data is re­qui­red and how it can be com­pi­led as ef­fi­ci­ently as pos­si­ble.

To take ad­van­tage of the CbCR-ba­sed safe har­bour re­gu­la­ti­ons, we use a tool-ba­sed in­itial ana­ly­sis with our Tran­si­tio­nal CbCR Safe Har­bour Quick Check. Ba­sed on al­re­ady avail­able tax CbCR data – supp­le­men­ted with cer­tain ad­di­tio­nal in­for­ma­tion – this al­lows to check in which tax ju­ris­dic­tions your com­pany could be­ne­fit from tem­porary re­li­efs. The Tran­si­tio­nal CbCR Safe Har­bour Quick Check also pro­vi­des in­di­ca­ti­ons in which ju­ris­dic­tions or group com­pa­nies spe­cial ef­fects or po­ten­ti­ally im­plau­si­ble data re­cords exist that could pre­vent the ap­pli­ca­tion of safe har­bour ru­les.