Pillar 2: German Minimum Tax Adjustment Act

Overview

The German Minimum Tax Act entered into force on December 28, 2023, and implements the EU Directive on Global Minimum Taxation. Although the legislative process has been completed, further adjustments are still needed: Germany must transpose new OECD administrative guidelines into national law within 24 months of their publication. This is now being done through the German Minimum Tax Adjustment Act.

The act also includes accompanying tax measures. The aim is to eliminate or limit cross-border defensive measures that have become redundant due to the minimum tax. Furthermore, amendments to the Financial Administration Act and the EU Mutual Assistance Act implement the requirements of the DAC9 Directive. This simplifies the reporting process and reduces administrative burdens by enabling the centralized submission of minimum tax reports within the EU.

Important Changes to the MinStG

• “Unreported taxes” will henceforth also include taxes relating to fiscal years prior to the transition year (Section 45(2)(2) of the German Minimum Tax Act). However, they will continue to be treated as simplified reported taxes under the CbCR Safe Harbour (Section 87(4) of the German Minimum Tax Act).
• Deferred tax assets that are not recognized on the balance sheet due to the option under Section 274(1), sentence 2 of the German Commercial Code (HGB) will in future be included in the total amount of adjusted deferred taxes (Section 50(1), sentence 2, No. 3 of the MinStG).
• Deferred taxes must in future be calculated on the basis of the so-called Minimum Tax Book Values (Section 50(1a) MinStG). This effectively results in an obligation to prepare a separate tax balance sheet for the minimum tax.
• The subsequent taxation of deferred taxes is simplified by the option to form groups (Section 50a MinStG).
• In the case of conversions, it is clarified that acquisition gains are generally tax-exempt and that acquisition losses are also not taken into account for tax purposes (Section 66(2) MinStG).
• Groups of companies with different or shortened fiscal years must submit their first minimum tax report no earlier than June 30, 2026 (Section 75(3) MinStG).
• An exception to the obligation to file the minimum tax report applies if the minimum tax report has already been filed by the ultimate parent company in an EU member state (Section 75(2), sentence 1, no. 2 MinStG).
• In the future, there will be an obligation to correct erroneous minimum tax reports (Section 75a MinStG).
• The rules governing tax attributes for the transition year are specified in more detail (Sections 82 through 82c of the German Minimum Tax Act). They concern the treatment of deferred taxes from the fiscal year preceding the first-time application of Pillar
• CbCR Safe Harbours:
  • Groups of companies that are not required to prepare a country-by-country report may nevertheless use the Safe Harbour provided they base their disclosures on the information they would have provided had a reporting obligation existed (Section 84(1) MinStG).
  • Within a tax jurisdiction, consistent data sources must be used—either annual financial statements or reporting packages (Section 87(2) MinStG).
  • For permanent establishments without qualified accounting data, the documents used to prepare the country-by-country report may be relied upon (Section 87(2)(4) MinStG).
  • In addition, there are new rules to prevent abusive arrangements in connection with the CbCR Safe Harbour (Section 87b MinStG).
• For business units that are already subject to the QDMTT prior to the application of the IIR or UTPR, a new transition year is provided for the QDMTT as soon as the IIR or UTPR takes effect (Section 93a MinStG).
• In the future, a statutory regulation is to designate the tax jurisdictions with recognized qualified IIRs, UTPRs and QDMTTs (Section 99(5) MinStG).

Accompanying Tax Measures

• License barrier (Section 4j of the Income Tax Act): This provision is repealed retroactively as of 2025.
• CFC taxation:
  • Section 9 AStG: The absolute exemption limit increases from €80,000 to €100,000. It will apply on a corporate basis in the future. The relative exemption limit is increased from 10% to one-third. The assessment will now take place solely at the level of the intermediate company, thereby eliminating the previously required shareholder-specific assessment step at the level of domestic shareholders. Effective as of 2026.
  • Section 13 AStG: Introduction of a minimum ownership threshold of 10% for investment income. The presumption rule of § 7 (4) sentence 2 AStG (interaction of partners in a partnership) does not apply to the related parties to be included. Effective retroactively from 2022. In addition, the exemption limits will be adjusted in accordance with § 9 AStG. Effective from 2026.
• Exit Taxation: In cases of return under Section 6(3) of the AStG as in effect through June 30, 2021, the exit tax does not apply if so-called substantial profit distributions or a substantial return of capital occur after August 16, 2023. “Substantial” means more than 25% of the fair market value of the shares. This closes a regulatory gap that had previously been addressed by the tax authorities via a Federal Ministry of Finance (BMF) letter, now through a statutory provision. Effective retroactively as of July 1, 2021.
• Investment Tax Law (Section 37 InvStG): Prevention of double counting of additional amounts for special investment funds.

Minimum Tax Reporting Regulation

Almost simultaneously with the MinStAnpG, the legislative process for the Minimum Tax Reporting Regulation (MinStBV) was also concluded on December 29, 2025. The regulation specifies the scope, structure, and exchange of information for minimum tax reports. It clarifies that the minimum tax report must be prepared based on the GloBE model rules. It also includes a simplification provision: Under certain conditions, simplified reporting is permitted for fiscal years ending before July 1, 2030.

Outlook

In addition to national law, the international framework surrounding Pillar 2 continues to evolve rapidly. The United States continues to reject the implementation of the OECD guidelines, citing instead its own minimum tax system. Most recently, threats of punitive tariffs against countries that adopt Pillar 2 have led to significant tensions. In response, the G7 countries have agreed on a so-called “Side-by-Side” approach, which is to be implemented through the “Side-by-Side” package published by the OECD on January 5, 2026. This package also includes new relief measures through the Safe Harbours.