Global Minimum Taxation
Pillar Two / MinStG
Germany’s Minimum Tax Act (MinStG) has been in force since 1 January 2024. For corporate groups with annual revenue above EUR 750 million, this creates new filing obligations, standalone GloBE income calculations and ongoing deadlines vis-à-vis the Federal Central Tax Office (BZSt). The first GIR filing for financial year 2024 is due on 30 June 2026.
What is the Global Minimum Tax?
The global minimum tax — known internationally as Pillar Two or GloBE (Global Anti-Base Erosion) — is the most far-reaching reform of international corporate taxation in decades. Its objective: corporate groups with consolidated annual revenue of at least EUR 750 million should pay an effective tax rate of at least 15 % in every jurisdiction — measured against the specifically defined GloBE Income, not the conventional tax result.
The Core Concept
15 % Minimum Tax Rate
Where the effective tax rate of a constituent entity in a jurisdiction falls below 15 %, the parent entity may be required to pay a top-up tax — regardless of whether that jurisdiction has itself implemented Pillar Two.
German Law
Minimum Tax Act (MinStG)
Germany has transposed the OECD GloBE Model Rules into national law through the MinStG. It applies in principle to financial years beginning on or after 1 January 2024. The Minimum Tax Amendment Act (MinStAnpG, BGBl. 2025 I Nr. 353) updated the rules with effect from 23 December 2025.
OECD Framework
G20/OECD Two-Pillar Solution
Over 140 states have committed within the Inclusive Framework. The GloBE Model Rules, the Commentary and the Administrative Guidance form the international reference framework. Authoritative: OECD Consolidated Commentary 2025 (May 2025).
Key Distinction
Not: a Standard Tax Return
Pillar Two compliance requires a standalone GloBE income calculation per jurisdiction and the preparation of a GloBE Information Return (GIR) using the OECD template — it is not an appendix to the Corporate Income Tax (CIT) return.
Are we in scope?
Scope Test — two thresholds must both be met
Threshold 1 — Revenue
EUR 750 million annual revenue
The benchmark is the consolidated revenue as reported in the consolidated financial statements of the Ultimate Parent Entity (UPE) under the applicable accounting standard — not the sum of standalone financial statements (§ 1(1) MinStG). Pure holding structures without operating business may also fall within scope.
Threshold 2 — Time Period
2 of the 4 Preceding Years
The threshold must have been met in at least two of the four financial years preceding the relevant year. For initial entry into scope: check whether 2022/2023 was already exceeded.
Note: Groups below EUR 750 million may nonetheless be indirectly affected — for example as a subsidiary of a larger group or where individual jurisdictions have introduced a domestic QDMTT. Joint and several liability: Domestic constituent entities are jointly and severally liable under § 3(5) MinStG for the Filing Entity’s minimum tax obligation. A German subsidiary can therefore be held directly liable for the group’s entire Pillar Two debt.
The Framework: Three Collection Mechanisms
Pillar Two operates through three interlocking mechanisms. Their order of priority is set by law: QDMTT takes precedence, and IIR has priority over UTPR. The effective tax rate is calculated per jurisdiction, not per constituent entity. The authoritative interpretive framework is the OECD Consolidated Commentary 2025 (May 2025), which consolidates all Administrative Guidance through March 2025.
Income Inclusion Rule
Income Inclusion Rule (IIR)
The parent entity levies a top-up tax on the under-taxed profits of its subsidiary. Governed in Germany by §§ 8 et seq. MinStG. Applies to the direct Filing Entity resident in an IIR state.
Undertaxed Profits Rule
Undertaxed Profits Rule (UTPR)
Applies where the Filing Entity does not levy an IIR or is itself under-taxed. Governed in Germany by §§ 13 et seq. MinStG — but only from 1 January 2025 (not 2024). For financial year 2024, Germany therefore had no operative UTPR mechanism against US groups.
Qualified Domestic Minimum Top-up Tax
Qualified Domestic Minimum Top-up Tax (QDMTT)
Instead of serving a foreign IIR, the state of residence itself levies a domestic top-up tax. Takes precedence over IIR and UTPR. Governed in Germany by §§ 78 et seq. MinStG.
ETR = Covered Taxes ÷ GloBE Income — both components require standalone calculations
The effective tax rate (ETR) is the quotient of two adjusted figures: Covered Taxes in the numerator and GloBE Income in the denominator. Both deviate substantially from commercial accounting starting values and require independent calculations.
GloBE Income: The starting point is the financial statements under the applicable accounting standard. Substance-based exclusions for payroll costs and tangible assets (SBIE) then apply, along with specific deferred tax adjustments and numerous special rules for transition years.
Covered Taxes: Not every tax shown in the financial statements qualifies as a Covered Tax in the GloBE sense. Adjustments for deferred tax assets, withholding tax caps and hybrid-related shifts can cause the numerator to diverge substantially from the commercial tax position.
Without calculating both components, no reliable ETR conclusion can be drawn.
Recent Developments 2025–2026
The Pillar Two framework is not static. Since the MinStG entered into force, significant changes have occurred at both national and international level that materially affect compliance burden and tax impact.
DAC9 — GIR Information Exchange in the EU
EU Council Directive DAC9 (Council Directive (EU) 2025/872) governs the cross-border exchange of GloBE Information Return data between EU Member States. The first reporting obligation is equally due on 30 June 2026.
Minimum Tax Amendment Act (MinStAnpG) New
The MinStAnpG (BGBl. 2025 I Nr. 353) updated the MinStG. For the royalty barrier of § 4j EStG, a two-stage approach applies: from 1 January 2024, the low-tax threshold was reduced to 15 %; from tax year 2025, § 4j EStG is repealed in full, as IIR, UTPR and QDMTT take over its protective function. Further amendments address deferred taxes and the transposition of OECD Administrative Guidance into national law.
Minimum Tax Return Regulation (MinStBV) New
The MinStBV (BGBl. 2025 I Nr. 373) designates the OECD GIR template as the binding format for the German minimum tax return. First submission to BZSt: 30 June 2026 for financial year 2024.
OECD Side-by-Side Package: US Special Status
The OECD Side-by-Side Package grants corporate groups with a US parent entity (UPE) a special status from financial year 2026: IIR and UTPR in Germany are disapplied for these groups, provided the USA is listed in the OECD Central Record as a Qualified SbS Regime. To date, only the USA appears in that register (as of May 2026). The GIR obligation for 2024 and 2025 remains fully in place.
European Commission Confirms SbS Applicability
The European Commission confirmed, via Communication C/2026/253, the applicability of the OECD Side-by-Side Package through Art. 32 of the EU Minimum Taxation Directive — without any amendment to the Directive. This provides legal certainty for the non-collection of IIR and UTPR against US groups from 2026.
Compliance Deadlines at a Glance
The MinStG creates new, standalone filing obligations that differ from the corporate income tax return deadlines. The key dates vis-à-vis the Federal Central Tax Office (BZSt):
Filing Notification FY 2024
Notification to the BZSt identifying which domestic group entity submits the GIR for FY 2024. Deadline has passed.
GloBE Information Return (GIR) FY 2024
First submission of the minimum tax return to the BZSt. Format: OECD GIR template per MinStBV. Simultaneously: exchange of information via DAC9 between EU Member States.
Exception § 75(2) MinStG: Where central filing abroad takes place with effective exchange of information, the domestic obligation may fall away.
Deadline approachingFiling Notification FY 2025
Filing Notification for financial year 2025. Deadline has passed. Late-filers: check whether retroactive submission is possible.
GloBE Information Return (GIR) FY 2025
Submission of the minimum tax return for FY 2025. Also applies to groups exceeding the threshold for the first time in 2025.
Filing Notification FY 2026
First opportunity to use the Side-by-Side Safe Harbour for US-UPE groups. Check whether an opt-in declaration is required.
Minimum Tax Declaration
Submission to the competent Tax Office of the Filing Entity. Deadline follows the general CIT return deadlines (with professional representation: typically by 31 July of the year after next).
No GIR preparation under way for FY 2024? Preparing a complete GloBE Information Return can take several weeks depending on group structure. Electronic submission is made via the BZSt Online Portal (www.bzst.de). Get in touch now to meet the 30 June 2026 deadline.
Schedule a Meeting NowSafe Harbours & Simplifications
The Pillar Two framework contains several simplification rules that can substantially reduce compliance burden. Their availability depends on specific conditions — blanket application is not possible.
CbCR Safe Harbour
Transitional Safe Harbour
Where a qualified Country-by-Country Report (CbCR) is available, simplified tests can be used to avoid the full GloBE income calculation for individual jurisdictions: the De Minimis Test, the Simplified ETR Test and the Substance-Based Test.
Side-by-Side Safe Harbour
Corporate groups with a UPE in a state listed in the OECD Central Record are exempt from IIR and UTPR in Germany from financial year 2026. To date, only the USA is listed (as of May 2026).
Substance-Based Income Exclusion (SBIE)
The Substance-Based Income Exclusion (SBIE) allows a standard deduction from GloBE net income based on payroll costs and the carrying amount of tangible assets. Applies to all affected jurisdictions in which genuine economic substance exists.
Simplified Materiality Test
Constituent entities may forgo the full GloBE calculation where the three-year average for a jurisdiction falls below both of the following thresholds: less than EUR 10 million in GloBE revenue and less than EUR 1 million in GloBE profit or loss (§ 87 No. 2 MinStG / Art. 5.1.1 GloBE).
Deferred Taxes in the Transition Year
The Transition Year provisions under §§ 70 et seq. MinStG allow existing deferred tax assets and liabilities to be brought into the GloBE calculation. This is complex, but can contribute substantially to reducing the effective GloBE ETR.
QDMTT Safe Harbour Art. 5.2 GloBE / permanent provision
Where a jurisdiction levies a qualified QDMTT, not only does the IIR top-up obligation fall away — the jurisdiction also qualifies for safe harbour treatment in the ETR calculation. For foreign parent entities with German subsidiaries: Germany’s QDMTT (from 2024) can eliminate the IIR obligation in the parent entity’s jurisdiction for Germany.
Frequently Asked Questions
What Our Clients Want to Know
Direct answers to the most frequently asked questions on global minimum taxation — from a management perspective.
Under § 1(1) MinStG, direct applicability is limited to groups with at least EUR 750 million in consolidated annual revenue. Below this threshold, the MinStG does not apply directly.
Indirect in-scope status may nonetheless exist: if your company is a subsidiary within a larger group that exceeds the threshold, it is part of the GloBE calculation — even if you yourself are substantially smaller. The GloBE rules operate at group level, not at the level of individual entities.
That depends on the group structure. Three relevant constellations exist:
US parent entity (US UPE): From financial year 2026, you may use the Side-by-Side Safe Harbour — IIR and UTPR in Germany then fall away for your group. The GIR obligation for 2024 and 2025 remains fully in place.
German or other non-US parent entity: No change. The full Pillar Two framework continues to apply, including IIR and UTPR.
German subsidiary of a US group: The GIR obligation continues to apply for 2024/2025. Whether the group uses the SbS Safe Harbour for 2026 is a decision for the US parent entity.
The first GIR filing for financial year 2024 is due at the Federal Central Tax Office (BZSt) by 30 June 2026. The format is prescribed by the MinStBV (BGBl. 2025 I Nr. 373) as the OECD GIR template.
For financial year 2025, the deadline is 30 June 2027. The Filing Notification must also be observed: it runs until the last day of February of the following year.
Exception: Central filing abroad (§ 75(2) MinStG). The domestic GIR obligation may fall away where the parent entity submits the GIR in another state and an effective automatic exchange of information exists between that state and Germany (DAC9 or GIR MCAA). Important restriction under § 75(4) MinStG: Mere filing abroad does not protect against German late-filing surcharges if the data exchange in practice fails.
The CbCR Safe Harbour allows the full GloBE income calculation for a jurisdiction to be foregone where three simplified tests based on the Country-by-Country Report are passed: a De Minimis Test, a Simplified ETR Test and a Substance-Based Test.
For the De Minimis Test, the averaging approach is decisive: the thresholds of less than EUR 10 million in revenue and less than EUR 1 million in profit or loss refer to the average of the current and the two preceding financial years (Art. 5.1.1 GloBE).
It applies under OECD Administrative Guidance to financial years beginning on or before 31 December 2026 — i.e. standardly 2024, 2025 and 2026. A prerequisite is a qualified CbCR whose data quality actually permits the tests to be applied.
Pillar Two complements the transfer pricing rules but does not replace them. A transfer price compliant with the Arm’s Length Principle can nonetheless result in a subsidiary in a low-tax jurisdiction falling below the 15 % threshold — obliging the parent entity to pay an IIR top-up tax.
In practical terms, this means: existing IP structures in low-tax jurisdictions, commodity trading companies with limited substance and cash-pool entities in tax-optimisation jurisdictions substantially lose their appeal under Pillar Two.
Through the Filing Notification, the domestic Filing Entity (or a designated domestic group entity) informs the BZSt of which entity in Germany is responsible for submitting the GIR.
The notification must be submitted anew for each financial year. Deadline: no later than the last day of February of the year following the financial year. For FY 2024 the deadline was 28 February 2025; for FY 2025 it was 28 February 2026.
Legal consequence of a missed deadline: If the Filing Notification is not submitted on time, a statutory designation mechanism applies under § 3(3) s. 4 MinStG. The most economically significant domestic business entity automatically becomes the Filing Entity. That entity then bears the full GIR obligation, regardless of whether it has access to the necessary group data. Combined with the joint and several liability of all domestic entities (§ 3(5) MinStG), the liability consequences for the affected company can be substantial.
Have further questions about your group’s structure? We assess your situation and tell you in advance whether and how we can specifically help you.
Request Initial ConsultationWhat KWS Handles for You
Pillar Two compliance is not a one-off project. KWS accompanies your corporate group from the initial scoping analysis through ongoing declaration to representation before tax authorities.
Scoping Analysis & Initial Assessment
Threshold test under § 1 MinStG, jurisdiction mapping, identification of affected constituent entities and initial assessment of the top-up tax exposure per low-tax jurisdiction. The foundation for all subsequent steps.
GloBE Income Calculation & ETR Analysis
Jurisdiction-by-jurisdiction calculation of GloBE Income and effective tax rate. Application of SBIE, deferred taxes and specific GloBE adjustments. Identification of jurisdictions with an ETR below 15 %.
Safe Harbour Analysis
Assessment of the availability of the CbCR Safe Harbour, SBIE, the Simplified Materiality Test and — from FY 2026 — the Side-by-Side Safe Harbour for US-UPE groups. Documentation of the elected simplifications.
Declaration: GIR, Filing Notification, Tax Return
Preparation of the GloBE Information Return using the OECD template (MinStBV), the Filing Notification to the BZSt and the Minimum Tax Declaration to the Tax Office. Full compliance with all statutory deadlines.
Deferred Taxes & Balance Sheet Matters
GloBE-compliant treatment of deferred taxes under IFRS and HGB in the Transition Year. Coordination with the auditor, documentation under §§ 70 et seq. MinStG. Particular expertise in German-Japanese and German-British group structures.
Tax Audit, Liability & International Coordination
Representation before the BZSt and Tax Offices in the context of tax audits. Under § 3(5) MinStG, domestic constituent entities are jointly and severally liable for the Filing Entity’s minimum tax obligation. KWS coordinates with partner firms in Japan, UK, USA and other jurisdictions.
KWS advises exclusively in international tax law. Pillar Two is not a peripheral topic — it is a core advisory field of our firm.
Also: Transfer PricingYour Point of Contact for Pillar Two / MinStG
Advisory by Recognised Expertise
Global Minimum Taxation · Pillar Two / MinStG · Transfer Pricing
Martin Blesgen
Dipl.-Volkswirt · LL.M. (International Tax Law, WU Vienna) · Tax Adviser Managing Director, KWS International Steuerberatungsgesellschaft mbH
Publications- Editor: “Transfer Pricing in Germany”, Otto Schmidt Publishers, Cologne
- Author: German VAT Chapter, EU VAT Compass, IBFD Amsterdam
- Contribution to European Taxation, IBFD Amsterdam
- “Permanent Establishments of Insurance Companies”, in: “Permanent Establishments in International Tax Law”, Linde Publisher, Vienna
Initial Consultation — Pillar Two / MinStG
Tax Advisers for Global Minimum Taxation — Request a Consultation Now
Whether scoping analysis, GIR preparation to meet the 30 June 2026 deadline, or support with Safe Harbour analysis — as a specialist firm, we are your point of contact for Pillar Two in Germany, Japan, UK and the USA.
This page provides a general overview of global minimum taxation under Germany’s Minimum Tax Act (MinStG) and the OECD GloBE Model Rules and does not constitute individual tax advice. The authoritative international interpretive framework is the OECD Consolidated Commentary 2025 (May 2025). The legal position in the area of Pillar Two continues to evolve: in particular, the adoption status of the Side-by-Side Safe Harbour (SbS), a possible extension of the Transitional CbCR Safe Harbour and national implementation in individual jurisdictions may change at short notice. For advice tailored to your specific mandate, please contact us directly. → Contact