Origin
OECD rules, implemented nationally
The OECD’s GloBE rules are required in the EU by a directive and implemented in Germany in the Minimum Tax Act. Other states follow the OECD model with laws of their own.
Pillar 2 in brief
The global minimum tax, explained visually.
The 15 per cent logic, the threshold, the order of collection, the three safe harbour tests and the obligations in each year – shown precisely, with a worked example to try out.
For the executive board Pillar 2 in four sentences
- Obligation
- Groups with consolidated revenue of €750 million or more in two of the four preceding years: where the effective tax rate in a jurisdiction is below 15 per cent, a top‑up tax generally arises for that jurisdiction.
- Every year
- The tax function delivers the provision for the consolidated financial statements, the GloBE Information Return (GIR) as XML and the minimum tax return – documentation and reporting obligations may apply even without a tax charge.
- Risk
- Missing mandatory data, inconsistent ownership chains or contradictions between safe harbour disclosure and computation: authorities can reject flawed filings.
- Lever
- The CbCR safe harbour: if a jurisdiction passes one of three tests and the relief is claimed, the full calculation is not required there – a transitional rule only.
01 · The 15 per cent logic
Fifteen percent per jurisdiction. Whatever falls short is topped up.
The computation runs per jurisdiction, not per entity: the adjusted covered taxes of all constituent entities in a jurisdiction relative to their GloBE income give the effective tax rate. If it is below 15 per cent, the gap is the top‑up tax percentage.
Simplified example for orientation – not a computation of your case, not tax advice.
Values of the example
| GloBE income of the jurisdiction | €100.0m |
|---|---|
| Adjusted covered taxes | €9.0m |
| Substance-based income exclusion | €20.0m |
| Effective tax rate | 9.0% |
| Top‑up tax percentage | 6.0% |
| Excess profit | €80.0m |
| Top‑up tax | €4.8m |
Without JavaScript the default example is shown here; the sliders appear once JavaScript runs.
Simplified: without domestic top‑up tax, losses, elections, additional top‑up tax and allocation to parent entities.
Details
Substance
The exclusion only affects the base
The substance-based income exclusion from eligible payroll costs and tangible assets reduces the profit to which the top‑up tax percentage is applied – not the effective tax rate. Elections made have to be listed in the GloBE Information Return.
02 · Scope
From €750 million in revenue. In two of the four preceding years.
In Germany, the Minimum Tax Act generally covers groups with consolidated revenue of at least €750 million in at least two of the four preceding fiscal years. This can include wholly domestic groups. Exceptions apply to certain entities.
Threshold test over four preceding years Four preceding fiscal years with fictional consolidated revenue of 620, 710, 830 and 910 million euros. Two years are at or above the threshold of 750 million euros – the group is in scope for the year tested. Threshold 750 620710830910 Year
−4Year
−3Year
−2Year
−1
Year tested
2 of 4 above the threshold: in scope
The test is repeated for every fiscal year.
Details
- Ultimate parent entity
- The income inclusion rule attaches to it; in Germany the minimum tax is owed by the group head. One entity can file the GloBE Information Return centrally for the group where the conditions are met.
- Constituent entities
- Every group entity feeds in income, covered taxes, payroll costs and tangible assets. Permanent establishments count as separate entities.
- Special cases
- Partnerships, flow-through entities, partial ownership and joint ventures follow special rules.
- Group head in Germany
- The group head is notified to the German Federal Central Tax Office. The GloBE Information Return (GIR, the minimum tax report under German law) and the minimum tax return are separate procedures.
Scope check
Three questions, one classification. Right here, without sending any data.
The check classifies your situation under the rules. It does not replace a tax assessment.
Runs only in your browser · nothing is stored or transmitted
03 · Collection
Who collects the top‑up tax. In a fixed order.
A jurisdiction’s top‑up tax is not collected twice. Three rules apply one after the other; whatever one stage does not collect passes to the next.
- 01 QDMTT
Qualified domestic minimum top‑up tax
The low-tax jurisdiction itself
The jurisdiction where the profits are low-taxed collects the top‑up tax itself. A qualified domestic top‑up tax is credited against the other rules.
- 02 IIR
Income inclusion rule
Jurisdiction of the parent entity
The parent entity pays the remaining top‑up tax of its low-taxed constituent entities, in proportion to its ownership interest.
- 03 UTPR
Undertaxed profits rule
Other jurisdictions of the group
The backstop: any top‑up tax still outstanding is allocated to constituent entities in jurisdictions applying this rule, using an allocation key.
The German Minimum Tax Act uses its own German terms for the three rules; the order is the same.
04 · CbCR safe harbour
Three tests, one pass is enough. A transitional rule only.
The transitional safe harbour applies a simplified test based on the qualified country-by-country report. Where the eligibility conditions and one of the three tests are met and the relief is claimed, the jurisdictional top‑up tax is deemed to be zero.
Per jurisdiction and fiscal year · qualified country-by-country report
-
Safe harbour not claimed for this jurisdiction in an earlier year, or its conditions not met?
Then it is precluded for the jurisdiction in subsequent years – unless the group had no constituent entity there in the prior year.
Yes: Precluded · full calculation
-
Test 1
De minimis test
Revenue below €10 million and profit before tax below €1 million in the jurisdiction?
Yes: Top‑up tax deemed zeroon election · disclosures in the return remain
-
Test 2
Simplified effective tax rate
Simplified covered taxes relative to profit before tax at least equal to the transition rate?
Yes: Top‑up tax deemed zeroon election · disclosures in the return remain
-
Test 3
Routine profits
Profit before tax no higher than the substance-based income exclusion from payroll costs and tangible assets?
Yes: Top‑up tax deemed zeroon election · disclosures in the return remain
No: No test passed · full calculation for the jurisdiction
Details
The transitional safe harbour is time-limited and applies per jurisdiction only on election. Specific conditions and exceptions apply; the transition rate rises in steps, and the substance-based income exclusion follows transitional rates.
Permanent safe harbours also exist, for example for a qualified domestic minimum top‑up tax or based on simplified calculations. The OECD has published further changes to the safe harbours; whether and how they apply depends on national implementation.
05 · The obligations in each year
Provision, computation, return. Every fiscal year anew.
Documentation and reporting obligations may apply even when no top‑up tax is due. The sequence repeats every year – shown here without dates, in the order of the work.
- 01 During the fiscal year
Structure and data
Group structure, key figures from reporting, tax positions from the jurisdictions.
- 02 At the reporting date
Provision
Determine the expected top‑up tax and book it in the consolidated financial statements, often approximated on prior-year country-by-country reports.
- 03 With the country-by-country report
Safe harbour tests
Three criteria per jurisdiction on a CbCR basis; where one is met and claimed, no full calculation is needed there.
- 04 On the financial statement data
Full calculation
GloBE income, adjusted covered taxes, substance-based income exclusion, top‑up tax, allocation.
- 05 For filing
Report and return
GloBE Information Return as XML following the OECD schema, and the minimum tax return.
- 06 In the following year
True-up
Reconcile deviations from the booked provision (true-up) and carry the structure forward.
Next fiscal year
06 · GloBE Information Return
The GIR is the moment that shows whether the data is right.
- 01Group structure
- 02Safe harbour disclosures per jurisdiction
- 03Computations
- 04Elections
- 05Allocation
Details
- How it is filed
- As XML following the OECD schema with country-specific additions – in Germany electronically to the German Federal Central Tax Office.
- What makes it fail
- Missing mandatory fields, inconsistent ownership chains, contradictions between safe harbour disclosure and computation. Authorities can reject faulty packages.
- Corrections and following years
- A report once filed can be corrected under the rules of the authority. For the following year, structure and master data are carried forward and adjusted where they change; the annual data is entered afresh.
Data readiness
What you need to start. And what you usually already have.
Seven things should be at hand before the first computation runs – most of them already exist in a group tax department.
Details
- 01Group structure and ownership interests
- 02Country-by-country reports
- 03Key figures per constituent entity
- 04Tax positions from the jurisdictions
- 05Elections and decisions
- 06An existing GIR, if there is one
- 07Responsibilities
If something is missing, that is no obstacle: in the demo we go through the list together.
Questions from practice
Five questions, answered briefly.
What is a GloBE Information Return (GIR) and how is it filed?
The GloBE Information Return (GIR), in Germany the minimum tax report, is the annual data package: group structure with all constituent entities, safe harbour disclosures per jurisdiction, computations, elections and the allocation to the taxable entities. It is filed as XML following the OECD schema with country-specific additions, in Germany electronically to the German Federal Central Tax Office.
How do the three CbCR safe harbour tests work?
The transitional safe harbour tests three criteria per jurisdiction on the qualified country-by-country report: de minimis with revenue below €10 million and profit before tax below €1 million, the simplified effective tax rate against the transition rate, and routine profits against the substance-based income exclusion. Where a jurisdiction meets one criterion and the relief is claimed, its top‑up tax is deemed zero.
How is the Pillar 2 provision determined for the consolidated financial statements?
At the reporting date, the expected top‑up tax is estimated per jurisdiction and booked, based on the data then available; the safe harbour tests often run as an approximation on prior years’ country-by-country reports. Jurisdictions without safe harbour go into the full calculation from GloBE income, adjusted covered taxes and the substance-based income exclusion. Later deviations are adjusted in the following year.
Who is in scope of the global minimum tax?
Groups with consolidated revenue of at least €750 million in at least two of the four preceding fiscal years – in Germany under the Minimum Tax Act, including wholly domestic groups. All constituent entities of the group are covered, including permanent establishments; exceptions apply to certain entities. Documentation and reporting obligations may apply even when no top‑up tax is due.
What happens when a jurisdiction falls out of the safe harbour?
If a jurisdiction meets none of the three criteria or the relief is not claimed, the full calculation applies there: GloBE income, adjusted covered taxes, substance-based income exclusion, top‑up tax and allocation to the taxable entities. In both cases the transitional safe harbour is precluded for that jurisdiction in subsequent years – unless the group had no entity there in the prior year. The disclosures in the GloBE Information Return remain required.
Sorted by role – for the head of tax, the tax team, IT and procurement, and on working together. Answered briefly on the FAQ page. All questions and answers
07 · Glossary
Key terms. Terms from A to Z.
Adjusted covered taxesComputation
Adjusted covered taxes are the income taxes of the constituent entities in a jurisdiction, adjusted under the GloBE rules; they form the numerator of the effective tax rate.
BZStReporting
The BZSt is the German Federal Central Tax Office, which receives the GIR electronically.
CbCRReporting
The CbCR (country-by-country report) is the jurisdiction-level group report and the data basis of the safe harbour tests.
CERules
A CE (constituent entity) is an individual group company or permanent establishment within the meaning of Pillar 2.
ETRComputation
The ETR (effective tax rate) is adjusted covered taxes relative to GloBE income for a group in a given jurisdiction.
Excess profitComputation
Excess profit is a jurisdiction’s net GloBE income after deducting the substance-based income exclusion; the top‑up tax percentage is applied to it.
GIRReporting
The GIR (GloBE Information Return), called the minimum tax report in the German Minimum Tax Act, is the annual XML data package to the tax authorities.
GloBE incomeComputation
GloBE income is the financial accounting profit of a constituent entity, adjusted under the GloBE rules; aggregated per jurisdiction it forms the denominator of the effective tax rate.
IIRRules
The IIR (income inclusion rule) allocates the top‑up tax of low-taxed constituent entities to a parent entity of the group, usually the ultimate parent entity, in proportion to its ownership interest.
MinStGRules
The MinStG is the German Minimum Tax Act, the national implementation of Pillar 2.
Pillar 2 / GloBERules
Pillar 2, also known as the GloBE rules, is the OECD framework for the global minimum tax of 15 per cent for groups with revenue of €750 million or more.
ProvisionReporting
The provision is the amount to be booked in the consolidated financial statements for the expected top‑up tax.
QDMTTRules
The QDMTT is the qualified domestic minimum top‑up tax of a jurisdiction, credited against the top‑up tax; where a qualified domestic top‑up tax applies, a safe harbour of its own may be available.
Safe harbourRules
A safe harbour is a simplification rule; central in practice is the transitional safe harbour on a CbCR basis: where a jurisdiction meets the conditions and one of the three criteria, the full calculation is not required on election; the disclosures in the return remain.
Substance-based income exclusionComputation
The substance-based income exclusion is an exclusion based on eligible payroll costs and tangible assets. It reduces the profit base for top‑up tax, not the income base used to calculate the effective tax rate.
Top‑up taxComputation
Top‑up tax is the additional tax collected when a jurisdiction’s effective tax rate falls below 15 per cent.
Top‑up tax percentageComputation
The top‑up tax percentage is the difference between 15 per cent and a jurisdiction’s effective tax rate, where that rate falls below 15 per cent.
True-upReporting
The true-up is the adjustment in the following year when the final computation deviates from the booked provision.
UPERules
The UPE (ultimate parent entity) is the company at the top of the group.
UTPRRules
The UTPR (undertaxed profits rule) is the backstop for top‑up tax collected neither domestically nor under the IIR.
No term found.
Sources
- OECD – GloBE Model Rules (Pillar Two) (external link, opens in a new tab)The rulebook of the global minimum tax
- OECD – GloBE Information Return, XML schema (external link, opens in a new tab)Data format of the information return
- BZSt – Pillar 2 procedure (external link, opens in a new tab)German filing procedure for the information return
- Mindeststeuergesetz (MinStG) (external link, opens in a new tab)German statute at gesetze-im-internet.de
This page explains; it does not advise.
We develop software. Tax advice is provided on request by the expert team of LOHR+COMPANY GmbH Wirtschaftsprüfungsgesellschaft.
Pillar 2 at LOHR+COMPANY (external link, opens in a new tab)
From knowledge to routine.
Pillarworks covers exactly this annual cycle: from data entry through safe harbour and computation to the finished GIR XML file in the authority’s profile, checked before export. Your group submits it.
Request a demo info@lctechnology.de
+49 211 16451‑100 · L+C Technology GmbH · Kennedydamm 24 · 40476 Düsseldorf, Germany