Global minimum taxation
(Pillar 2): Current context, developments and implications

In previous drafts of the MinStAnpG, the reporting packages used for consolidation purposes (known in practice as “reporting packages”) were already intended to serve as a qualified data basis for, among other things, the calculation of transitional safe harbor provisions (Section 87 (2) sentence 2 no. 1 MinStG-E). This provision remains part of the MinStAnpG and thus represents an extremely relevant simplification for companies. In addition, reporting packages are now also to be used as a data basis for the purposes of Section 82 (1) sentence 1 MinStG-E and thus for the full calculation (Full GlobE calculation) in the first year of application.

The newly created provisions to prevent abuse pursuant to Sections 82 et seq. MinStG-E represent a significant change to the drafts under discussion. The introduction serves to implement the OECD administrative guideline on Pillar 2 published on January 15, 2025, and is intended to prevent circumvention of the minimum tax, in particular through government measures and regulations that enable the capitalization of deferred taxes. The new regulations further increase the complexity of applying the MinStG.

Section 274 (1) sentence 2 HGB provides for an option to capitalize deferred taxes. The amendment to Section 50 (1) sentence 2 no. 3 half-sentence 2 MinStG-E is intended to enable the recognition of an asset surplus for Pillar 2 purposes that is not recognized as deferred tax assets under Section 274 HGB or a comparable foreign regulation. This is expressly to be welcomed. However, it is questionable whether the current wording achieves the legislator's intention; this is only made clear in the explanatory memorandum to the law. It is to be hoped that the final version of the law will provide clarification in this regard.

In addition, the new regulation does not cover all cases of unrecognized deferred taxes for the purposes of calculating the minimum tax. This applies, for example, to cases under Section 274a No. 4 HGB, i.e. small corporations within the meaning of the HGB that are exempt from the application of Section 274 HGB. As a result, unrecognized deferred tax assets for such companies could continue to be disregarded for minimum tax purposes.

The introduction of the MinStG results in an overlapping scope of application with the license barrier pursuant to Section 4j EStG. Previously, the license barrier was intended to prevent German business expense deductions in the case of preferential taxation at a rate of 15% on license income from foreign license creditors. This provision is being repealed. The measure is to be welcomed in view of the reduction in bureaucracy and simplification of tax legislation.

On the other hand, the repeal of Section 4i EStG, which was still included in the second discussion draft, is no longer planned. Section 4i EStG is intended to prevent double deduction of operating expenses in cases where expenses are deducted both abroad as operating expenses and in Germany as special operating expenses. The explanatory memorandum to the second draft bill correctly pointed out that the introduction of Section 4k EStG means that Section 4i EStG is no longer necessary. It is not clear why the legislature has departed from this view. In the interests of simplifying tax legislation, the final MinStAnpG should again provide for the repeal of Section 4i EStG.

Sections 8 et seq. of the AStG regulate German additional taxation for low-taxed subsidiaries that generate so-called passive income. Section 9 AStG in its current version provides for an exemption limit of 10% and EUR 80,000 of total income for mixed income (i.e. both active and passive income), with the result that passive income is disregarded if it falls below this limit. This exemption limit is to be increased to one third and EUR 100,000.