18.12.2023Upper house of parliament approves legislation to implement EU Pillar Two directive
Pillar Two rules apply for fiscal years that start after 30 December 2023
On 15 December 2023, the German upper house of parliament approved legislation on the domestic implementation of Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups (the “Pillar Two directive”). The lower house of parliament approved the legislation on 10 November 2023 (see GTLN dated 11/20/23). It is expected that the signature of the president and the publication in the federal gazette, which are required for the law to enter into force, will take place in the next couple of days. Subsequently, the law will enter force for fiscal years that start after 30 December 2023.
The final legislation on the domestic implementation of the Pillar Two directive is mostly based on the draft version that was published by the government on 17 August 2023 (see GTLN dated 08/22/23) and consists of 101 sections.
In addition to the domestic implementation of the Pillar Two directive, the final law includes certain changes to the German GAAP rules due to such implementation.
The law also includes a reduced threshold of 15% for the application of the royalty barrier rule and the controlled foreign company rules.
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Andreas Maywald
Client Service Executive | ICE - German Tax Desk
