The global minimum taxation of companies is always part of media reporting. The reason for this is an EU Directive from 2022 (2022/2523), which must be transposed into national law. The minimum taxation includes a tax rate of 15% (analogous to the existing corporate tax) and is to apply to international groups with sales above EUR 750 million. With a current bill, the Federal Ministry of Finance (BMF) is transposing the EU Directive into national law.
1st Background of the Global Minimum Taxation
With the global minimum taxation, the European Union wants to ensure more tax justice in all member states. The focus of the directive is on international corporations that transfer profits – legally – through subsidiaries to particularly favorable tax jurisdictions. By considering each company in isolation, individual parts of the company are subject to low taxation, while other (for example, in Germany) establishments are burdened to a greater extent with corporation and business tax.
The directive, which now has to be transposed into national law, wants to ensure uniformity here. In the future, regardless of the place of origin, all profits of a group will be taxed at a uniform rate of at least 15%. This affects groups of companies that generate an annual turnover of at least EUR 750 million.
2.Who is specifically affected by the minimum taxation?
The global minimum taxation applies to groups whose parent company is based in Germany (or another EU Member State to which the Directive also applies). The tax office in charge checks which parts of the group – primarily subsidiaries – have taxed their profits at less than 15% so far. Where this limit has been exceeded, the Member State concerned also has a right to tax.
Example: A-AG is based in Germany. It holds a 100 % stake in a total of seven subsidiaries based in low-tax countries. The Group generates an annual profit of EUR 1,000,000,000, with EUR 200,000,000 attributable to Germany. Moreover, profits abroad are taxed at 5%. Since in Germany corporate and business tax already ensures a tax of at least 15 %, the global minimum taxation applies only to foreign subsidiaries. The Treasury can levy a further 10% tax here.
The peculiarity of the global minimum taxation is therefore that the German state has a right to tax the foreign companies even if there is no connecting point in the country due to lack of headquarters or management.
The regulations on minimum taxation have no effect, however, on groups that already have to tax all profits with at least 15%.
Example: Domestic A-AG pays 30% corporate and business tax. It is involved in seven foreign limited companies, each of which is subject to 16% corporate taxes. Since the 15% limit is exceeded in all tax jurisdictions, the German Treasury has no further right to tax.
Planned Changes to Domestic Tax Law
The current draft of the BMF for the implementation of the global minimum taxation provides for several measures. They primarily concern:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.