The global minimum tax, explained.

The framework

A minimum tax rate of 15 percent. Under the applicable rules in each jurisdiction.

• Origin

  OECD rules, implemented nationally

  The OECD’s GloBE rules apply in the EU by directive and in Germany through the Minimum Tax Act. Other states follow the OECD model with laws of their own.

• Mechanics

  Effective tax rate per jurisdiction

  Per jurisdiction: covered taxes relative to the GloBE income of all entities resident there. An effective tax rate below 15 percent can give rise to top‑up tax. The amount depends, among other factors, on the rate difference, profit after the substance-based income exclusion and any creditable domestic minimum top‑up tax.

• Collection

  Who pays the top‑up tax

  A domestic minimum top‑up tax applies to low-taxed profits in the jurisdiction concerned. The income inclusion rule operates at parent-entity level; the undertaxed profits rule acts as a backstop through constituent entities under the applicable allocation rules.

• Substance

  Exclusions and elections

  Exclusions and elections affect the top‑up tax per jurisdiction. Every election has to be documented, disclosed and assessed for its benefit.

Scope

Groups with revenue of €750 million or more. Group scope and exclusions matter.

In Germany, the Minimum Tax Act generally covers groups with consolidated revenue of at least €750 million in at least two of the four preceding fiscal years. This can include wholly domestic groups. Certain entities are excluded.

• Ultimate parent entity

  Usually carries the filing obligation and the top‑up tax under the income inclusion rule.

• Constituent entities

  Every group entity feeds in income, covered taxes, employees and tangible assets. Permanent establishments count as separate entities.

• Special cases

  Partnerships, flow-through entities, tax groups, partial ownership and joint ventures follow their own allocation rules.

• Group head in Germany

  The group head is notified to the Federal Central Tax Office. The GloBE Information Return and the minimum tax return are separate procedures.

Safe harbour

Three tests per jurisdiction, one finding.

The Transitional CbCR Safe Harbour tests in simplified form on the basis of the qualified country-by-country report. Where the eligibility conditions and one of the three tests are met, the jurisdictional top‑up tax amount can be treated as zero.

• Test 1

  De minimis test

  Revenue and profit in the jurisdiction are below fixed thresholds.

• Test 2

  Simplified ETR test

  The ratio of simplified covered taxes to the relevant profit before tax meets the transition rate. The tax amount is derived from qualified financial accounting information and adjusted under the safe harbour rules.

• Test 3

  Routine profits test

  Profit in the jurisdiction does not exceed the substance-based income exclusion from payroll and tangible assets.

The Transitional CbCR Safe Harbour is time-limited. If it is not applied for a jurisdiction, later use may be precluded. Specific conditions and exceptions apply.

GloBE Information Return

The GIR is the moment that shows whether the data is right.

• What it contains

  The group structure with all constituent entities, safe harbour disclosures per jurisdiction, computations, elections made and the allocation to the taxable entities.

• How it is filed

  As XML following the OECD schema with country-specific additions – in Germany to the Federal Central Tax Office via its bulk data interface.

• Where it fails

  Missing mandatory fields, inconsistent ownership chains, contradictions between safe harbour disclosure and computation. Authorities reject faulty packages.

• Corrections and following years

  A GIR can be corrected and reused the following year – structure and master data remain, only the annual data changes.

Data readiness

What you need to start. And what you usually already have.

Seven things should be at hand before the first computation runs – most of them already exist in a group tax department.

1. 01
   Group structure and shareholdings
2. 02
   Country-by-country reports
3. 03
   Key figures per constituent entity
4. 04
   Tax positions from the jurisdictions
5. 05
   Elections and decisions
6. 06
   An existing GIR, if there is one
7. 07
   Responsibilities

If something is missing, that is no obstacle: in the demo we go through the list together.

Glossary

The terms that keep coming up.

Pillar 2 / GloBE

OECD rules on the global minimum tax of 15 percent for groups with revenue of €750 million or more.

MinStG

The German Minimum Tax Act, the national implementation of Pillar 2.

ETR

Effective tax rate, a group’s effective tax rate in a jurisdiction.

Top‑up tax

The additional tax collected when a jurisdiction’s effective tax rate falls below 15 percent.

GIR

GloBE Information Return, the annual XML data package to the tax authorities.

CbCR

Country-by-country report, the jurisdiction-level group report and the data basis of the safe harbour tests.

Safe harbour

Simplification rule: jurisdictions that pass the tests are spared the full computation.

QDMTT

Qualified domestic minimum top‑up tax of a jurisdiction, credited against the top‑up tax.

UPE

Ultimate parent entity, the top of the group.

CE

Constituent entity, an individual group company or permanent establishment within the meaning of Pillar 2.

Substance-based income exclusion

An exclusion based on eligible payroll costs and tangible assets. It reduces the profit base for top‑up tax, not the income base used to calculate the effective tax rate.

BZSt / DIP

Germany’s Federal Central Tax Office and its bulk data interface for filing the GIR.

Provision

The amount to be booked in the consolidated financial statements for the expected top‑up tax.

True-up

Adjustment in the following year when the final computation deviates from the booked provision.