German Parliament votes to introduce global minimum taxation
On 10 November 2023, the German Parliament, by a large majority, adopted the draft law submitted by the Federal Government to implement the Council Directives (EU) 2022/2523 on ensuring a global minimum level of taxation and accompanying measures (the “Mindestbesteuerungsrichtlinie-Umsetzungsgesetz”) for multinational enterprise groups and large-scale domestic groups.
Minimum taxation rules effective 2024
According to the German government, the aim of the law is to implement key elements of international agreements that “counteract harmful tax competition and aggressive tax arrangements and thus contribute to promoting tax justice and a level playing field”.
The Financial Committee already gave its approval to the Federal Government’s draft law on 8 November 2023. The Federal Council has already announced that it welcomes the draft law, as it means “the Federal Government is fulfilling its obligation under European law”. We therefore expect the necessary approval from the Federal Council before the end of 2023.
This should also mean that there are few obstacles to the timely transposition of the EU Minimum Taxation Directive into German law. The minimum taxation rules would then apply for financial years beginning after 30 December 2023.
Small but no less significant adjustments ahead of the vote
Compared to the government draft of 16 August 2023, the version of the now adopted law takes into account, in particular, OECD guidelines and announcements as the “Agreed Administrative Guidance” that have been issued in the meantime. The legislative version thus considers, e.g., the Simplified Calculations for the Safe Harbour Rules. It also includes rules for allowances and currency conversions. Furthermore, the Federal Ministry of Finance is entitled by law to issue regulations on the detailed arrangements for the exchange of information in the GloBE Information Return and Safe Harbour Rules. This also ensures that the international standards are incorporated into German law.
The German “Mindestbesteuerungsrichtlinie-Umsetzungsgesetz” also makes adjustments and changes to existing tax law applying as of 2024. These additional measures lower the minimum tax threshold from 25 % to 15 % for CFC regimes (para. 8 sec. 5 G-Foreign Tax Act (“Außensteuergesetz”)) and licence limits (para. 4j G-Income Tax Act (“Einkommensteuergesetz”)). The result is a reduction in the scope of these standards. The draft originally provided for the abolition of the licensing barrier [you can read about it in our article dated 1 August 2023], but this is no longer provided for in the legislation.
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