[World Tax News] Germany’s Tax Act 2026 | OECD GloBE Update | Panama Rules

Editorial Team – [2026] 187 taxmann.com 212 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. Germany Releases Draft Annual Tax Act 2026; Proposes AI Training Using Citizens’ Data

The German Federal Ministry of Finance has published the draft Annual Tax Act 2026 (Jahressteuergesetz 2026) proposing a broad range of amendments to income tax, corporate tax, VAT, tax administration and procedural laws. The Bill primarily seeks to align German tax legislation with EU law, judicial developments and administrative requirements, while also advancing digitalisation and reducing compliance burdens.

Among the key proposals are a simplified withholding-tax relief mechanism for royalty payments, an increase in the threshold under the Research Allowance Act, revision of the interest rate applicable to tax interest calculations, changes to platform reporting rules, reforms relating to child tax benefits for EU/EEA residents, and a comprehensive overhaul of the VAT group taxation regime (Organschaft).

A significant income-tax measure introduces a statutory framework for allocating the purchase price of developed real estate between land and buildings. The proposal generally respects contractual allocations unless they materially deviate from actual values and prescribes valuation principles where no acceptable allocation exists.

The Bill also proposes increasing the threshold for obtaining withholding-tax exemption certificates for certain royalty payments from EUR 10,000 to EUR 100,000, thereby reducing compliance obligations for eligible taxpayers. In addition, the maximum eligible amount under the Research Allowance Act would increase from EUR 15 million to EUR 25 million, enhancing tax incentives for research and development activities.

One of the notable digitalisation measures is the introduction of a specific legal framework for the use of Artificial Intelligence (AI) by tax authorities. The proposed amendment to Section 29c of the German Fiscal Code would permit tax authorities to process personal data for the development, testing, improvement and operation of AI systems, including systems covered by the EU AI Act. The proposal clarifies that taxpayer data may be used where anonymisation or pseudonymisation is not feasible or would require disproportionate effort, while requiring such data to be deleted within prescribed timelines. The measure aims to provide legal certainty for the data-protection-compliant use of AI in tax administration.

Source – Official Website

2. OECD releases consolidated commentary on GloBE Rules (2026)

The OECD/G20 Inclusive Framework has released the Consolidated Commentary to the Global Anti-Base Erosion (GloBE) Model Rules (2026), bringing together the original Commentary issued in March 2022 and all Agreed Administrative Guidance released up to January 2026 into a single document. The Commentary aims to promote consistent interpretation and application of the Pillar Two Global Minimum Tax Rules across jurisdictions.

The GloBE Rules are designed to ensure that large multinational enterprise (MNE) groups pay a minimum level of tax in each jurisdiction where they operate. The framework operates through a system of Top-up Taxes that increase the effective tax rate on low-taxed profits to the agreed minimum level. The rules primarily function through the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR).

The Commentary provides detailed guidance on the scope of the rules, including the application of the EUR 750 million consolidated revenue threshold, determination of constituent entities, treatment of excluded entities, and special rules for mergers, demergers, joint ventures, and multi-parented groups.

It also explains the methodology for computing GloBE Income or Loss, Adjusted Covered Taxes, jurisdictional Effective Tax Rates (ETRs), Top-up Taxes, and substance-based income exclusions. In addition, the document addresses tax neutrality regimes, distribution regimes, filing obligations, administrative procedures, and transition rules.

A significant feature of the consolidated text is the inclusion of guidance on various safe harbour regimes, such as the Transitional CbCR Safe Harbour, QDMTT Safe Harbour, Transitional UTPR Safe Harbour, and Simplified ETR Safe Harbour, which are intended to reduce compliance burdens and simplify Pillar Two calculations in eligible cases.

Source – OCED

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