The Minimum Tax Law (MinStG): What Companies Need to Know

The Minimum Tax Law (MinStG) was introduced to ensure that multinational companies pay a minimum level of tax in the countries where they operate. The MinStG applies for the first time to financial years starting after December 30, 2023. Its purpose is to prevent companies from exploiting tax planning opportunities to pay too little tax, particularly in countries with low tax rates. For many companies, the MinStG introduces new obligations, particularly in terms of declaring minimum taxes and submitting tax returns. In this article, we explain what companies and tax advisors need to consider when implementing the regulations.

Deadlines and Declaration

Obligations Companies must adhere to specific deadlines to comply with the requirements of the MinStG. One of the key obligations is the notification of the "group parent" of the minimum tax group. This must be reported electronically to the Federal Central Tax Office (BZSt) no later than two months after the end of the tax period, which usually corresponds to the calendar year, specifying which domestic entity acts as the group parent. The group parent must also inform all other group members about its role.

Another central point concerns the minimum tax report and the minimum tax return. These must generally be submitted by the group parent no later than 15 months after the end of the financial year. For the first submission, this deadline is extended to 18 months. It is therefore important to begin preparing the required documents in a timely manner to avoid missing the deadlines.

Relevant Documents for the Minimum Tax Return in 2024

To correctly calculate the minimum tax and submit the necessary returns, companies must provide specific documents:

• Consolidated financial statements of the ultimate parent company (2020–2023): These are required to verify the applicability of the MinStG.
   
• Current organizational chart: This helps identify the relevant companies within the business that need to be included in the MinStG.
   
• Country-by-Country Reporting (CbCR) for 2022–2024: The CbCR is needed to determine whether the CbCR Safe Harbour can be applied in Germany, which would allow an exemption from paying the minimum tax.
   
• Financial statements or consolidated reporting packages for entities located in Germany: These must be provided for the years 2022–2024 to accurately assess the tax impact of the MinStG.

Action Requirements for Companies

For companies, it is crucial to act early to meet all the MinStG requirements. Key steps include:

• Coordination with the tax group management: Clarify whether the declaration obligations will be centrally managed and who will be responsible for submitting the MinSt report.
   
• Determining the group parent: If there are multiple domestic companies, the group parent must be identified or designated as the entity responsible for submitting the minimum tax return.
   
• Early procurement of relevant documents: All required documents from prior financial years must be provided in time.
   
• Creation of the qualified CbCR for 2024: Companies should prepare the CbCR in time to determine whether the CbCR Safe Harbour can be applied, which would lead to an exemption from the minimum tax.
   
• Assessment of the potential tax burden: Companies need to estimate the impact of the minimum tax on the tax balance for 2024, particularly if tax loss carryforwards or deferred taxes are involved.

Conclusion

The Minimum Tax Law presents new challenges for companies, particularly in terms of the timely and correct submission of tax returns. Careful planning and the timely provision of required documents are critical to avoiding additional tax burdens and meeting legal requirements. Companies should consult their tax advisors early and ensure that all necessary steps are taken to comply with the provisions of the MinStG.