Pillar II/GloBE - German Ministry of Finance issues first draft
On 20 March 2023 the German Ministry of Finance has issued the first draft of a law implementing EU Pillar II/Global minimum tax directive into German tax law (Minimum Tax Act). As required by the European Commission the provisions shall be applicable to fiscal years starting on or after 31 December 2023.
In accordance with the EU Directive dated 15 December 2022 multinational and national groups with aggregated annual revenues of at least 750 million Euro should be subject to a newly introduced Minimum Tax Act.
As far as the income of the group members in a jurisdiction is not taxed with an effective minimum tax rate of 15 % a supplementary tax (top-up tax) is to be paid, in general on level of the ultimate parent entity (UPE). Transitional safe harbour rules as outlined by the OECD are included in the draft to relieve companies from computation and declaration requirements to a certain degree.
Note: Good news for companies with direct pension obligations to (former) employees: In line with OECD administrative guidance, Germany plans to apply the add back of accrued pension expenses for GloBE income purposes only in relation to pension obligations outsourced to a pension fund. In other cases (e.g., direct pension obligations), according to the explanatory memorandum of the draft Minimum Tax Act, accrued expenses shall be recognized in full in the year in which the expenses were taken into account in the profit or loss for accounting purposes.