Germany’s Annual Tax Bill reaches committee with Pillar Two and VAT-group changes

Pillar Two safe harbours

Article 24 would add Side-by-Side and UPE Safe Harbours to the Mindeststeuergesetz as new sections 81a and 81b. On application, they would reduce specified IIR and UTPR top-up tax to zero where the ultimate parent’s jurisdiction has a recognised qualifying regime. The bill would also extend the transitional country-by-country reporting safe harbour in section 84 to financial years beginning by 31 December 2027 and ending before 1 July 2029. The new safe harbours are proposed for financial years beginning after 31 December 2025.^[2][6]

Withholding relief and research incentives

For royalties subject to section 50a withholding, Article 3 would increase the simplified treaty-relief ceiling in Einkommensteuergesetz section 50c(2) from €10,000 to €100,000 for amounts received after 2026. Payments above the ceiling would still require an application, and the payer’s filing obligation would remain. Article 10 would separately raise the Forschungszulagengesetz section 4(3) state-aid ceiling from €15 million to €25 million per undertaking and project, proposed with effect from 1 January 2026; it would not increase the general eligible-expenditure base.^[2][3][4]

A prospective VAT-group system

New Umsatzsteuergesetz section 2c would replace the current section 2(2)(2) VAT-group mechanism with a prospective declaration system. Declarations could be filed from 1 July 2029, with first application from 1 January 2030. The wider VAT package also addresses platform deemed supplies, OSS procedures, call-off-stock rules and reverse charge for specified emissions certificates.^[2][5]

Reporting and full-interest changes

The bill would add a prompt correction duty for inaccurate country-by-country reports under Abgabenordnung section 138a, with the related penalty provision applying from 1 July 2027. Platform reporting would extend to qualifying third-country exchange relationships for reporting periods beginning on or after 1 January 2027. It would also change the special full-interest rate in sections 233a and 238 from 0.15% to 0.3% a month from 2027; it would not change every statutory interest rate.^[2][7][8]

Proposal-stage package

All measures remain proposals. No Finance Committee recommendation or amended text had been published by 11 October 2026. Bundesrat recommendations reproduced with the government’s responses in the bill annexes are not operative provisions unless incorporated later; that includes the government-supported recommendation to keep the Pillar Two transitional rate at 17% for 2026 and later years.^[1][2][6]