Germany’s Ministry of Finance has released a second discussion draft on 6 December 2024 for a proposed amendment to the Minimum Tax Act. This draft aims to implement Council Directive (EU) 2022/2523, which establishes a global minimum tax framework.

Earlier, on 16 August 2023, the German government approved a proposed bill concerning the adoption of Council Directive (EU) 2022/2523, commonly referred to as the “Pillar Two directive.”

The Ministry released the first draft in August 2024, incorporating OECD guidelines from December 2023. It includes updates on the country-by-country reporting (CbCR) safe harbour application for companies and measures to prevent circumvention of the CbCR safe harbour.

The amendments also incorporate provisions for the right to capitalise under Section 274 of the German Commercial Code. Additionally, numerous editorial revisions have been made, including adjustments to the wording of the EU Directive, corrections of reference errors, as well as other important administrative simplifications.

At the end of 2023, the global effective minimum tax was implemented with the Act to implement Council Directive ( EU ) 2022/2523 on ensuring a global minimum tax and other accompanying measures for tax periods from 2024, including other accompanying measures ( e.g., lowering the low tax threshold for foreign-controlled companies and the license barrier from 25% to 15%).

The OECD/G20 Inclusive Framework on BEPS has now published two new administrative guidelines in December 2023 and June 2024, which require an adjustment of the minimum tax law. Germany has committed to implementing such administrative guidelines within 24 months of publication.

The second draft incorporates amendments to include the OECD administrative guidelines released in June 2024.  This particularly concerns the simplification for companies in the retroactive taxation of deferred taxes and the regulations for the treatment of transparent units in so-called transparent structures, including special features when allocating taxes.

In order to prevent obstacles to conversion due to the minimum tax alone, it is also made clear that takeover profits as a result of the loss of participation in the transferring company are in principle tax-free. Takeover losses, on the other hand, are not taken into account.

In addition, the second discussion draft provides for a large number of editorial changes as well as further administrative simplifications. In addition, in anticipation of the planned EU directive (DAC9), which concerns the intergovernmental exchange of information on minimum tax reports (GloBE Information Return) between the EU member states, corresponding regulations have already been included.

Finally, the second discussion draft contains various accompanying measures. This concerns the abolition of the ban on deducting special business expenses for transactions with a foreign connection (Section 4i EStG), the abolition of the license barrier (Section 4j EStG), the abolition of the additional tax on income with the character of a capital investment (Section 13 AStG), the increase in the relative and absolute exemption limit for additional tax on income (Section 9  AStG), the adjustment of the reduction amount in cases of tax groups (Section 11 AStG) and the avoidance of the double assessment of additional amounts for special investment funds and their investors.