Germany’s Federal Ministry of Finance has revised its Global Minimum Tax FAQs, adding guidance on the OECD-endorsed “side-by-side” arrangement to support compatibility between Pillar Two and the US tax system, while confirming the 15% minimum tax framework and Germany’s implementation status.

Germany’s Federal Ministry of Finance revised its Global Minimum Tax FAQs on 16 February 2026. The update primarily adds guidance on the “side-by-side” arrangement endorsed by the BEPS Inclusive Framework in January 2026, which is intended, among other objectives, to ensure compatibility between the Pillar Two rules and the US tax system.

International corporate taxation is a fairly abstract topic. What exactly is being changed?

This concerns one of the largest reforms of international corporate taxation. The reform consists of “two pillars”:

Pillar One aims to ensure a fairer distribution of taxing rights among countries. The new rules are particularly important for taxing large digital corporations, which can generate extremely high profits in countries—such as through online sales or advertising click revenues—without having a physical presence there, such as a factory or other permanent establishment. Under the existing rules, taxes are mainly due where companies are physically present. New rules are therefore needed to adequately reflect the increasing digitalisation of the economy. Companies should pay taxes where they generate their profits.

In addition, the reform ensures that all companies make a fair contribution to financing the public good. To this end, Germany, together with France, proposed a global effective minimum tax in October 2018. The global effective minimum tax forms part of Pillar Two of the reform. Ultimately, the aim is to increase the overall tax base for all countries by introducing a minimum level of taxation and to put a stop to aggressive tax planning. This also strengthens the competitiveness of companies that do not make use of such arrangements.

What steps have been taken to introduce the minimum tax?

On 1 July 2021, the members of the so-called Inclusive Framework on BEPS, the relevant body within the Organisation for Economic Co-operation and Development (OECD), reached a broad international agreement in principle on the key elements of the reform.

On 9–10 July 2021, the finance ministers of the 20 leading industrialised and emerging economies (the G20) adopted this concept in Venice. However, some technical details remained open. These were clarified at a further meeting of the Inclusive Framework on BEPS on 8 October 2021. In addition, the international community agreed on an implementation roadmap for the agreed measures.

A total of 141 countries have since joined the international agreement. The results were endorsed at the meeting of G20 finance ministers on 13 October 2021 in Washington.

For the implementation of the global effective minimum tax under Pillar Two, the OECD Secretariat published internationally agreed model rules on 20 December 2021, intended to serve as a blueprint for transposing the global effective minimum tax into national law. These model rules were supplemented on 14 March 2022 by the publication of model commentary to assist with interpretation and application.

To ensure uniform implementation within the European Union, the EU Member States agreed on a common directive on 15 December 2022. This directive had to be transposed into national law by 31 December 2023.

By now, all EU Member States—with the exception of a few smaller EU countries (which may defer implementation for up to five years if fewer than twelve ultimate parent entities are resident in the jurisdiction)—have transposed Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation into national law. Outside the EU, many other countries are in the process of implementation or preparation, or have already implemented the rules. Among the larger economies, Australia, the United Kingdom, Japan, Canada and Switzerland have implemented the rules, although Switzerland has for the time being limited implementation to the domestic top-up tax. The United States is the only G7 country that has not transposed the global effective minimum tax into national law.

The global minimum tax and the special role of the US

Upon taking office, the current US President signed a memorandum on 20 January 2025 to the US Secretary of the Treasury concerning the OECD two-pillar solution (“OECD Global Tax Deal”). The memorandum states that the OECD Global Tax Deal allows extraterritorial taxation of US income and restricts the United States’ tax policy discretion. As a result, countries that would apply the rules to the United States were threatened with retaliatory measures. Nevertheless, the US administration continued to affirm its commitment to engagement within the OECD and the Inclusive Framework on BEPS (IF on BEPS). The G7 agreement of 28 June 2025 prevented the announced US retaliatory measures.

In early January 2026, the more than 145 jurisdictions of the Inclusive Framework on BEPS unanimously agreed on the key elements of a so-called Side-by-Side package (SbS package), which, among other things, enables the integration of the US minimum tax system into the system of the global effective minimum tax. At the same time, companies will benefit from significant administrative simplifications. Efforts to combat tax evasion and tax dumping will thus continue.

The core elements of the SbS package include:

  • the introduction of an indefinite safe harbour for a simplified calculation of the effective tax rate and an extension of the CbCR safe harbour;
  • the introduction of a safe harbour for certain substance-based tax incentives, aligning their treatment worldwide for purposes of the global minimum tax;
  • the introduction of additional safe harbours for groups whose ultimate parent entity is resident in a qualifying jurisdiction whose tax system meets the requirements for minimum taxation;
  • an evidence-based review process to ensure a level playing field across all IF on BEPS jurisdictions;
  • confirmation that domestic top-up taxes remain a primary mechanism within the system to protect national tax bases, particularly in developing and emerging economies.

What is the current status of implementation in Germany?

On 16 August 2023, the Federal Cabinet adopted the government draft of a law to implement Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation, along with additional accompanying measures. The draft was subsequently adopted by the Bundestag on 10 November 2023 and by the Bundesrat on 15 December 2023. It was published in the Federal Law Gazette on 27 December 2023 (Federal Law Gazette 2023 I No. 397). The rules apply for the first time to financial years beginning after 30 December 2023.

With the Act amending the Minimum Tax Act and implementing further measures, new administrative guidance issued by the OECD on 15 December 2023, 24 May 2024 and 13 January 2025 was implemented. This act was published in the Federal Law Gazette on 23 December 2025 (Federal Law Gazette 2025 I No. 353).

Why is the minimum tax a matter of fairness?

When large, globally operating corporations pay hardly any tax because they shift their profits to tax havens, this is profoundly unfair. First, this deprives the general public of funds needed, for example, for good schools and childcare facilities, hospitals and pensions, as well as a well-developed rail network and proper roads. Second, it is not right that German companies pay taxes at an appropriate level while highly profitable international corporations save billions in taxes through loopholes. This will now come to an end.

What will the minimum tax rate be?

The minimum tax rate is 15%.

Which companies are affected by the minimum tax rules?

Under the EU directive, the minimum tax applies to all internationally active companies and large domestic groups with revenues exceeding EUR 750 million. In future, all profits earned worldwide by an international group will be taxed at 15%, regardless of where they arise. Until now, those subsidiaries of the group located in tax havens have paid hardly any tax, benefiting the group as a whole. This will no longer be possible.

How is it ensured that the minimum tax is actually paid?

If, for example, the profits of a subsidiary in a tax haven are effectively taxed at only 5%, the new rules apply.

In this case, the state in which the parent company is resident is entitled, at a minimum tax rate of 15%, to levy an additional 10% tax on the profits from the tax haven. This ensures that these profits are ultimately subject to effective taxation at 15%.

In addition, the new rules prevent groups from shifting profits to tax havens through artificial arrangements. One such arrangement is the payment of licence fees to another group company located in a tax haven—for example, licence fees for the use of brand names, patents or other rights.

In the example, these rights are held within the group by a company based in a tax haven. This company regularly receives licence payments from other group companies located in high-tax countries. In this way, those companies can reduce their taxable profits, as they can deduct the licence fees as business expenses.

Such arrangements will no longer be possible in the future. Here too, additional taxation ensures that an effective tax burden at the level of the minimum tax is ultimately applied.

What do the new rules mean financially for Germany?

Current estimates indicate that the minimum tax will lead to an increase in tax revenues. The ifo Institute has also published a brief expert report on this topic.

Earlier, Germany’s Ministry of Finance released the officially prescribed data set and schema required for submitting minimum tax reports under the EU Directive 2022/2523 (Pillar Two).