Global minimum taxation poses new challenges for enterprises worldwide. In this interview, Dr Georg Bestelmeyer and Dr Nils Linnemann explain the background, the practical implications and the risks and recommendations for affected enterprises. The experts contribute their different perspectives and provide insights into the complex rules of this international tax initiative.
What exactly is global minimum taxation?
Dr Georg Bestelmeyer: Global minimum taxation is an initiative of the OECD and the G20 states that aims to ensure that enterprises worldwide are subject to an effective tax burden of at least 15 per cent. More than 140 states support it. The political aim of the minimum tax is to curb aggressive tax avoidance and ensure greater tax fairness.
Dr Nils Linnemann: The rules are extremely complex, and the practical implementation now poses major challenges for the enterprises concerned. The minimum tax breaks with established principles and is not linked to the individual entity, but to the corporate group as a whole or individual sub-areas (jurisdictions).
Which enterprises are affected?
Dr Nils Linnemann: The rules apply to all corporate groups with an annual turnover of at least EUR 750 million. That includes – despite US President Donald Trump’s executive order – US corporate groups and their subsidiaries, provided they are economically active in Germany.
Dr Georg Bestelmeyer: Inbound cases are particularly challenging. In the absence of a complete overview of the entire group, parallel shareholdings and the relevant group figures, enterprises based in Germany are often not even aware that they are affected by minimum taxation. Particularly in configurations with US parent companies, domestic business entities are subject to considerable declaration obligations.
Dr Nils Linnemann: Corporate groups that are below the turnover threshold are not affected, but caution is advised when it comes to mergers and acquisitions.
“Inbound cases are particularly challenging. Enterprises based in Germany are often not even aware that their group of companies is affected by minimum taxation.”
Dr Georg Bestelmeyer
Associated Partner
What does minimum taxation mean for affected enterprises?
Dr Georg Bestelmeyer: Corporate groups that previously benefited from low tax rates must now expect to bear an additional tax burden. The situation is different for enterprises that are already subject to an effective tax rate of at least 15 per cent by jurisdiction.
Dr Nils Linnemann: Irrespective of any additional taxes, the enterprises affected must comply with extensive registration and declaration obligations. Overall, the global minimum taxation requires thorough preparation and a large amount of coordination within the corporate group.
What impact does this have on tax planning?
Dr Nils Linnemann: Enterprises must ensure that their tax rate reaches the minimum tax rate of 15 per cent in all relevant countries. If this is not immediately possible, the next step is to examine whether distortions caused by the complexity of the rules can be mitigated by exercising options.
“We recommend conducting a comprehensive review of the company’s tax structure. An early analysis can help identify potential tax burdens and enable timely countermeasures.”
Dr Nils Linnemann
Associated Partner
What impact does this have on tax planning?
Dr Nils Linnemann: Enterprises must ensure that their tax rate reaches the minimum tax rate of 15 per cent in all relevant countries. If this is not immediately possible, the next step is to examine whether distortions caused by the complexity of the rules can be mitigated by exercising options.
Are there any risks that enterprises should take into account?
Dr Georg Bestelmeyer: One of the biggest challenges is collecting a large amount of minimum tax-specific data. IT solutions such as the Pillar 2 Management app can provide support here. In addition, the inconsistent interpretation of the new rules in different countries makes tax planning more difficult and increases the risk of double taxation.
Dr Nils Linnemann: The extensive reporting and documentation obligations also mean that compliance costs will go up. If these obligations are not met, enterprises risk not only back taxes but also severe fines and penalties.
What advice do you have for enterprises that want to prepare for minimum taxation?
Dr Nils Linnemann: We recommend reviewing the enterprise’s tax structure as a whole. An early analysis can help to identify potential tax burdens and take countermeasures. Optimising value chains can also help to minimise tax risks.
Dr Georg Bestelmeyer: One change is that the tax consequences are now indirectly linked to the consolidated financial statements. This means that in future, tax planning and group accounting can only be considered in a standardised way. Overall, this requires a rethink in tax planning: away from the consideration of individual entities and towards a genuine group approach. We therefore recommend taking a multidisciplinary view.