June 30, 2026
Germany - Proposes Pillar Two Safe Harbor Rules and Extends CbC Reporting Safe Harbor Framework
Summary
The German Federal Ministry of Finance (Bundesministerium der Finanzen) published the draft bill “Referentenentwurf eines Jahressteuergesetzes 2026 (JStG 2026)” on May 26, 2026, proposing amendments to German tax legislation, including changes related to the implementation of Pillar Two safe harbor provisions and country-by-country (CbC) reporting rules. The draft bill proposes the introduction of the Pillar Two side-by-side safe harbor and Ultimate Parent Entity (UPE) safe harbor, extension of the transitional period for the CbC reporting safe harbor, and introduction of a penalty provision for failure to correct CbC reports.
Key points
Proposed introduction of Pillar Two Side-by-Side Safe Harbor
The draft bill proposes amendments to the German Minimum Tax Act (Mindeststeuergesetz) to introduce the Pillar Two side-by-side safe harbor.
The proposed provisions apply for fiscal years beginning on or after December 31, 2025.
The side-by-side safe harbor is included as part of the proposed amendments to the German global minimum tax framework.
Proposed introduction of Ultimate Parent Entity (UPE) Safe Harbor
The draft bill proposes the introduction of an Ultimate Parent Entity (UPE) safe harbor under the German Minimum Tax Act.
The proposed provisions provide rules regarding the application of the UPE safe harbor within the German global minimum tax framework.
Extension of CbC Reporting Safe Harbor Transition Period
The draft bill proposes an extension of the transition period for the country-by-country (CbC) reporting safe harbor.
The extension applies to fiscal years beginning on or before December 31, 2027 and ending before July 1, 2029.
The CbC reporting safe harbor uses information contained in qualified country-by-country reports for purposes of certain global minimum tax calculations.
The safe harbor includes the following tests:
De minimis test
Simplified Effective Tax Rate (ETR) test
Routine profits test
Introduction of Penalty Provision for Failure to Correct CbC Reports
The draft bill proposes a penalty provision applicable where required corrections to CbC reports are not made.
The proposed rules establish consequences for failures to correct CbC reporting information in accordance with applicable requirements.
The draft bill does not extend the existing transitional penalty relief period related to CbC reporting obligations.
Legislative Status of Annual Tax Act 2026 Draft Bill
The draft bill is a legislative proposal containing 32 articles covering various technical amendments across German tax law.
The Federal Ministry of Finance published the draft bill on May 26, 2026.
The draft bill remains subject to the legislative process, during which amendments may be made before final adoption.
Source:
German Federal Ministry of Finance (Bundesministerium der Finanzen), Referentenentwurf eines Jahressteuergesetzes 2026 (JStG 2026) (May 26, 2026)
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Disclaimer:
This content is for general informational purposes only and does not constitute professional advice.
Information provided herein is based on publicly available sources as of the publication date and may be subject to change.
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