Selection of payment flows

Latest Update: December 2023

Selection of sectors

The EITI standard requires that all the important payment flows of a country’s extractive sector are considered. At various meetings, the MSG discussed which sectors of the natural resources extraction industry should be included in the 6th German EITI report. The following individual sectors were addressed:
  • Lignite
  • Crude oil and natural gas
  • Potash and salts
  • Quarried natural resources
The mining of hard coal in Germany ended in 2018. As for the previous reports, the sector is not included (cf. the general remarks on hard coal mining in Germany and State financial aid for the hard coal sector in chapter 2.a.iii., and in chapter 6).

Selection of companies

The EITI standard does not provide direct guidance for the process of selecting companies to be included in reporting – on the contrary, like the selection of sectors the selection of companies should be oriented on the objective of the EITI initiative to make the revenues of a country’s extractive industry transparent and to disclose any significant payment flows between companies and government agencies. Pursuant to EITI requirement 4.1b), payments and revenues are deemed to be significant if their non-consideration or misrepresentation could significantly affect the completeness of the EITI report.
Regarding the selection of companies, the MSG has resolved to comply with the requirements of EU Accounting Directive 2013/34 of June 26, 2013. The stated objectives of the EITI initiative and of the payment flows specified by the EITI are also largely congruent with the provisions of the EU Accounting Directive. Recital 44 and 45 of the Directive even explicitly state that
  • the regulations are intended to help governments in the implementation of the EITI principles and criteria and
  • that payments should be recorded which are comparable to those of the EITI.
The EU directive was transposed into German law by the BilRUG at the end of 2015. Pursuant to §§ 341q et seq. HGB, companies in the extractive industry must submit (consolidated) payment reports under certain conditions (registered office, legal form, size, activity) (see the comments in chapter 4.d.).
In various meetings, the MSG has agreed to further organise the content of the D-EITI process in accordance with the provisions of §§ 341 q et seq. HGB. This particularly affects:
  • the criteria for the identification of the companies that are eligible for reporting,
  • the relevant period of reporting
  • and the establishment of materiality thresholds for the payment flows which are to be reported.
The link to the statutory provisions of the HGB is intended to create the prerequisites for the widest possible participation of the companies; possible double burdens (for the participating companies), which could result from differences between the legal requirements for the (consolidated group) payment report and the reporting requirements for the EITI should also be avoided (see also chapter 4.d.ii.). According to § 341t (3) No. 1 HGB, dividend payments to a government agency that is a shareholder of the paying company are only to be listed in the payment report if they were not paid under the same conditions as to other shareholders.
Pursuant to § 267(3) of the HGB, the criteria for “large” companies were used as an initial basis for the identification of the companies. In this case, two of the following three criteria for classification as a “large” company must be fulfilled on at least two successive two successive closing dates:
  • Balance sheet total of €20 million
  • Sales of more than €40 million
  • A yearly average of more than 250 employees
Regarding the question whether or not an “activity” exists in the extractive industry, reference was made to Regulation 1893/2006/EC of December 20, 2006, which regulates the details of the statistical classification of economic activities. Section B of Annex I of this Regulation is divided into sub-sections 05 to 08 as follows:


WZ 2008 Code

Economic sector (WZ) 2008 – description

(a. n. g. = not specified elsewhere)

ISIC Rev. 4




Coal mining


Hard coal mining


Hard coal mining



Lignite mining


Lignite mining



Extraction of crude oil and natural gas


Extraction of crude oil


Extraction of crude oil



Extraction of natural gas


Extraction of natural gas



Extraction of natural gas


Ore mining


Iron ore mining


Iron ore mining



Non-ferrous metal ore mining


Mining of uranium and thorium ores



Mining of uranium and thorium ores


Other non-ferrous metal ore mining



Quarried natural resources, other mining products


Quarrying of natural stone, gravels, sand, clay and china clay


Quarrying of natural and artificial stone, limestone, gypsum, chalk and slate



Extraction of gravel, sand, clay and china clay



Other mining; quarrying a.n.g.


Mining of chemical and fertiliser minerals



Peat extraction



Extraction of salt



Quarrying a.n.g.


For identifying possible companies, companies assigned to one of the sub-sections 05 to 08 are considered to be primarily “active” in the extractive industry. In addition to the statutory duty to draw up payment reports for “large” companies, there is also an obligation for parent companies to prepare group (consolidated) financial statements if at least one subsidiary is active in the extractive sector. The size of this “active” subsidiary is not relevant here (a “consolidated tax group infection”), so that even companies which are themselves not classified as being “large” can trigger a reporting obligation simply through being combined with a “large” parent company.
The approach to “consolidated tax group infection” was also addressed for the purpose of identifying extractive industry companies; and the number of such companies increased accordingly. As a result, the selection is made using a combination of size and activity criteria (cf. the explanations in chapter 10.c.iii.). In addition to the size of the companies and the economic classification, the MSG also used a substantial coverage of the sectors as a criterion for the selection of companies.
Depending on the natural resource in question, there are significant differences in the number of companies and active employees in the various sectors in Germany’s extractive industry. The coal mining and oil and gas extraction sectors, for example, are dominated by a few large companies. The quarried natural resources sector, on the other hand, is characterised by a structural mix of few large suppliers and a high proportion of small and medium-sized enterprises. Most companies in this sector are not subject to any legal obligation to prepare payment reports and are therefore not covered by the criteria for identifying companies for the EITI Report (see also the explanations in chapter 10.c.iii.).
Requirements 2.6, 4.5 and 6.2 of the EITI standard are related to government shareholdings in extractive companies. In Germany, an extractive company with a majority state participation was identified – Südwestdeutsche Salzwerke AG. According to the 2021 Annual Report, the town of Heilbronn and the State of Baden-Württemberg hold a total of 93.11% of the voting rights in this company (cf. Annual Report 2021, p. 179). The dividend paid in 2021 for the previous financial year totalled €16,812,000.00, corresponding to €1.60 per share (see Annual Report 2021, p. 109). The share capital stands at €27 million and is divided into 10,507,500 individual shares.
Revenues as requested under requirement 6.2 of the EITI Standard (quasi-fiscal expenditures) were not identified.
In the MSG’s view, requirements 2.6, 4.5 and 6.2 of the EITI standard are sufficiently met by the above explanations.

Selection of payment flows

In accordance with the EITI standard, payment flows from the extractive industry must be considered if they are regarded as significant for a complete presentation of the company payments and state revenues. The following payment flows are recorded as part of the 6th German EITI report (see also the explanations in Revenues generated).


Corporation tax

Corporate tax is the main income tax of limited companies in Germany. It is not a specific tax for extractive industry companies but is levied on all limited companies that are domiciled in Germany or are active in the country. The assessment basis for corporate tax is the taxable commercial income, which is derived from the annual net profit; any tax modifications that may apply are also considered. If an enterprise is also active in other sectors as well as in the extractive sector, there may be delimitation problems regarding the share of corporate tax attributable to the activities in the extractive sector since the corporate tax is calculated on the basis of the total taxable income (cf. also Revenues generated).

For this reason, corporate tax is classified as a non-project-related payment in the payment reports to be prepared under commercial law. Allocation of these payments to activities within and outside the extractive sector can be selectively carried out by companies if a proper and reliable coding (based on appropriate allocation criteria) is possible. This commercial practice is pursued for the purposes of EITI reporting.

Trade tax

Commercial enterprises in Germany are subject to trade tax. The trade tax assessment procedure has two stages. Trade tax is levied on the trade income. The municipalities in which the respective company has permanent establishments are entitled to the trade tax. A permanent establishment can also extend over several municipalities. Payment recipients for trade tax payments are the relevant individual municipalities, and not the Federal Government or the federal states. This reflects the federal structure of the state in Germany (cf. also Revenues generated).

For administrative purposes, the tax authorities determine a tax assessment amount – based on the assessment basis determined for corporation tax – considering the provisions of the Trade Tax Act, which amounts to 3.5% of the trade income as the assessment base for all companies nationwide. The tax administration sends the tax assessment amount to the respective local authority in which the company has its permanent establishment. If the company has several permanent establishments or if a permanent establishment extends over several municipalities, the tax administration also divides the tax assessment amount among the municipalities according to a legally determined distribution key. The statements made in this chapter for the tax administration apply accordingly to trade tax for these sections of the administrative procedure.

Based on the upstream administrative procedure at the level of the tax offices, the respective municipality determines the amount of trade tax to be assessed and paid by the company to the municipality by multiplying the tax assessment amount notified by the tax authorities by the municipality-specific tax factor. The tax factor is determined by the elected members of the municipal council. The assessment process, which is divided between two administrative units as described above, is followed by the collection process (the actual payment process) which takes place exclusively at the level of the municipalities.

For a better understanding of the payments of corporate tax or trade tax reported in the context of data collection, further information on the recording of tax payments in certain parent-subsidiary constellations or on special features of tax payments in the context of fiscal inter-company relationships are provided below. While analysing the data collection, it became apparent that both aspects are of relevance for the classification and assessment of the reported tax payments.

Particularities with regard to the recording of tax payments in certain parent-subsidiary constellations

Business partnerships such as the GmbH & Co. KG traditionally play a leading role in Germany’s small and medium-sized enterprises, in contrast to many other jurisdictions. They are subject to trade tax, but not to corporate tax. Corporate tax is first levied at shareholder level, but only if the shareholder is a limited company. In this respect, one special feature of the German tax law should be noted, according to which business partnerships are not themselves the subject of taxes in terms of income tax; the income generated by the company is subject to taxation at the level of the shareholders, together with the income they have earned from other sources. In the subsidiary-partnership constellation of a parent limited company, consequences may arise for the recording of the tax payments (trade tax and corporate tax) within the framework of data collection for the EITI report; examples of such consequences are shown below. In each case, it is assumed that a company has voluntarily participated in the data collection for the EITI report if it is active in the extractive industry.
If both the parent limited company and the subsidiary business partnership are active in the extractive industry, all the relevant tax payments (trade tax of the subsidiary and the parent company as well as corporate tax at the parent company level) are recorded in the EITI report. If, on the other hand, the subsidiary or parent company is not active in the natural resources sector, either not all or too many tax payments to government agencies are recorded. If, for example, the parent limited company is active in the extractive industry, but the subsidiary-business partnership is not, the reported corporate tax payments of the parent company also include the financial results of the subsidiary. From a commercial law perspective, it is possible (but not mandatory) to allocate corporate tax payments to activities both within the extractive sector and outside of it. If, on the other hand, the subsidiary-business partnership is active in the extractive industry, but the parent limited company is not, trade tax payments are only recorded for the subsidiary through the subsidiary’s (sole) participation in the data collection, but not, the corporate tax paid by the parent limited company (on a pro rata basis) for the financial results of the subsidiary.
This handling of corporate tax is due to the German tax system. The MSG has decided to pursue this legal, tax-related standpoint, also for EITI purposes.

Particularities with regard to recording the tax payments of consolidated tax groups

German tax law has specific special arrangements in the case of trade tax and corporate tax for corporate groups. Under certain conditions, a so-called “consolidated tax group” may exist. In this constellation, the integrated company (controlled companies), which is a corporation, generally does not make any tax payments. The payment of taxes levied on the financial result of all the companies incorporated in the consolidated tax group is carried out entirely and exclusively by the parent company. The parent company in turn pays taxes on its own income and on the income of its subsidiaries, which may not exclusively result from activities related to the extraction of natural resources.
For the purposes of the (consolidated group) payment report under German commercial law, the following differentiations are made at the level of the parent company:
  • If the consolidated tax group is mainly active in the extractive industry pursuant to §341r No.1 HGB, reporting can be carried out for the total amount of the taxes paid by the parent company. There is no obligation to allocate the tax payments to activities within or outside the scope of §341r No.1 HGB.
  • If, on the other hand, the consolidated tax group is not mainly active in the extractive industry as set down in §341 r No. 1 HGB, the tax payments made by the parent company may be allocated on a voluntary basis. Otherwise, details of the tax payments made by the parent company will be omitted.
The results of the survey of payments demonstrate the major practical significance of consolidated tax groups and the payment of taxes by the parent company (cf. the remarks on the payments made in Payment flows 2021).

Regarding the recording of tax payments within the framework of consolidated tax groups, the MSG has also opted to pursue the viewpoint according to German commercial law for EITI purposes.

Mine site and extraction royalties pursuant to the BBergG

Mine site and extraction royalties are levied as a specific tax on extractive companies for free-to-mine natural resources, based on the German Federal Mining Act (BBergG) (§§30, 31 BBergG) (for further details see Revenues generated).

The MSG has decided to include mine site and extraction royalties in the EITI report as a payment flow.

Lease payments

Mine site and extraction royalties are the only taxes that are levied for the exploration and extraction of free-to-mine natural resources in Germany. However, lease payments may be paid to public authorities in connection with the extraction of natural resources that are not free-to-mine, particularly in the quarrying sector. This is the case when government agencies, as landowners, conclude private-law contracts with the extractive industry for the extraction of raw materials. Such contractual arrangements may include fixed payments or payments that depend on the quantity extracted, or a combination of both variants.
The recipients of the lease payments are the government agencies that have concluded the contractual arrangements with the company (e. g. towns and communities, forestry offices, as well as state property administration and moor management authorities).
The content and the number of contracts are not centrally documented (cf. chapter 4.b.iv.). In addition, the individual government agencies which have concluded lease contracts – unlike the individual tax offices in the case of corporate tax – cannot be centrally addressed via an organisational unit. This leads to difficulties in respect of quality assurance.

Just which government agencies – and how many of them – receive lease payments cannot be foreseen. This information can only be provided by the participating companies themselves within the framework of the data collection process.

Lease payments by companies to government agencies are therefore recorded as part of the data collection (no change here from the previous German EITI reports) but are not subject to separate quality assurance. The total amount of the lease payments, which are generally collected via the municipalities’ revenue offices, only plays a subordinate role in the 2021 reporting year when compared to the overall amount of the reported payments (this was also the case in the most recent D-EITI reports) and was at the same level as in the 2020 reporting year.

Payments for the improvement of the infrastructure

The payment flow complies with the legal provision (§ 341 r no. 3 g HGB) governing the (consolidated) payment report. The payments notified generally include measures taken by companies for restoring nature on the one hand and payments to promote municipal investments and educational institutions or for the creation or maintenance of public infrastructure on the other. In a similar way to the previous D-EITI reports, the measures reported for the 2021 reporting year can be attributed exclusively to companies from the lignite mining sector, so it is not a cross-sector payment flow.
In the first two D-EITI reports, the content and the composition of the reported payments were analysed in more detail by the Independent Administrator at MSG’s request. The results were then presented to the MSG. The results show a high degree of heterogeneity of the recorded payments. This stems from the variety of measures taken in connection with the compensation of impacts from the respective companies involved in lignite mining. Information on the recipients of payments and the purpose of these can partly be found in the companies’ payment reports.

Project level reporting

The EITI standard generally requires reporting at project levels (EITI Requirement 4.7). The MSG has decided to implement the content and scope of the project concept by the analogous application of legal regulation § 341 r No. 5 HGB. Payments to government agencies must therefore be detailed for each project if the reporting company has carried out more than one project during the reporting period. The concept of the project (“project level”) is concretised in § 341 r No. 5 HGB in the form of a summary of operational activities which form the foundation for payment obligations to a government agency and which are based on a contract, license, lease agreement, concession or a similar legal agreement or a series of operationally and geographically associated contracts, licences, lease agreements or concessions or associated agreements with a government agency which essentially provide for similar conditions.
As a rule, no project-related reporting is provided for “corporate tax” and “trade tax” payment flows, since these are flows that are based on a legal regulation and not on one of the legal agreements set down in § 341 r No. 5 HGB.
In the case of the “mine site and extraction royalties” payment flow, a further breakdown of the information below the level of payment obligations to a government agency defined as “project level” is ensured by specifying the corresponding approved/licensed site in the data report. In the case of lease payments and payments for infrastructure improvements, the data collection templates provide for a breakdown of payments between projects per government agency.

Materiality of payments

The commercial regulations for the preparation of (consolidated group) payment reports stipulate that the companies concerned must report payments of €100,000 and upwards made to individual government agencies per reporting year (cf. § 341 t(4) HGB). A government agency to which less than €100,000 has been paid during the reporting period does not have to be included.
The MSG has decided to adopt these rules also for the 6th D-EITI report. If payments made during reporting year 2021 amounted to less than €100,000 per government agency, the data collection templates require relevant proof of the existence of payments, but without mentioning any specific amounts. The 20 municipalities that received the highest trade tax payments from participating companies for the reporting year 2021 are included in the quality assurance process.


In Federal States in which legislation does not include an excavation law and the State-level Nature Conservation Law does not apply to the extraction of non-energetic, ground-based natural resources in the context of dry excavations, this type of natural resource extraction falls within the scope of the relevant state building regulations.

Legal limitations also exist: State building regulations apply to the excavation of solid rock (limestone, basalt, etc.), for example, in quarries with an area of up to 10 hectares (ha) in which no blasting is carried out. In the event that this area is exceeded, or if water bodies are formed after completion of the extraction operations, the German Federal Immission Control Act (BImSchG) and/or Water Resources Act (WHG) are applicable.
In Bavaria and North Rhine-Westphalia, the above-ground excavation of non-energetic, ground-based natural resources in the context of dry excavations is determined at state level by the existing excavation laws (AbgrG). For the excavation of solid rock (limestone, basalt, etc.) in quarries where blasting does not occur, the AbgrG applies to sites with an area of up to 10 ha. In the event that this area is exceeded, or if water bodies are formed after completion of the extraction operations, the German Federal Immission Control Act (BImSchG) and/or Water Resources Act (WHG) are applicable. In the other Federal States, this type of natural resources extraction is regulated by the respective state building regulations or by the state-level nature conservation laws.

In general, the AbgrG applies to those raw materials the excavation of which is not directly subject to mining law or the mining authorities. These raw materials include (in particular) gravel, sand, clay, loam, limestone, dolomite and other rocks, bog mud and clays. However, the jurisdiction between AbgrG and mining law can vary from case to case in the case of certain raw materials, such as quartz gravels. The requested authority must always verify its own jurisdiction in each case. The AbgrG also encompasses surface area usage and the subsequent rehabilitation of the area.
The German Federal Immission Control Act (BImSchG) is the most important and practice-relevant law in the field of environmental law. It constitutes the basis for the approval of industrial and commercial installations. In the natural resources extraction industry, quarrying companies must have approval to extract stones and earth. Every quarrying area of 10 hectares or more must undergo a full approval procedure, including public participation and UVP (environmental impact assessment). A more simplified approval procedure is used for quarrying areas of less than 10 hectares.

The sphere of responsibility for the legal immission control approval procedure is fully specified in the Immission Control Acts of the Federal States. The Federal States are tasked with the administrative enforcement of the approval procedure. Each individual state’s Environment Ministry – the highest local immission protection authority – usually bears the responsibility for this procedure. Subordinate authorities include regional councils, district authorities and lower-level administrative authorities. Administrative jurisdiction generally lies with the lower-level administrative authorities.
The GDP measures the value of goods and services produced domestically (creation of value) within a given period (quarter, year). The Federal Office of Statistics calculates the GDP as follows: production value minus intermediate consumption = the gross value added; plus taxes on products and minus subsidies = GDP
The gross value added is calculated by deducting intermediate consumption from the production values, so it only includes the value added created during the production process. The gross value added is valued at manufacturing prices, i.e. without the taxes due (product taxes), but including the product subsidies received.

During the transition from gross value added (at manufacturing prices) to GDP, the net taxes (product taxes less product subsidies) are added globally to arrive at an assessment of the GDP at market prices’. Source: Destatis
The planning approval procedure under mining law is used for the approval procedure of a general operating plan for projects which require an environmental impact assessment (§§ 52(2a), in conjunction with 57 a of the BBergG).
There are different definitions and methodological approaches at the international as well as at the national level as to what subsidies are and how they are calculated. According to the definition of the German government’s subsidy report, this report considers federal subsidies for private companies and economic sectors (ie grants as cash payments and tax breaks as special tax exemptions) which are relevant to the budget. Subsidies at the federal level can be viewed via the subsidy reports of the federal states (see Appendix 5 of the German government subsidy report).
In compliance with § 68(1), Water Resources Act (WHG), the excavation of landowners’ natural resources such as gravel, sand, marl, clay, loam, peat and stone in wet extraction operations requires a planning approval procedure. The reason for this is that groundwater is exposed in wet extraction, resulting in above-ground water. The planning approval procedure is implemented by lower-level water authorities.

The procedural steps of the planning approval procedure are governed by the general provisions of §§ 72 to 78 of the Administrative Procedures Act (VerwVfG). Within the meaning of § 68(3), nos. 1 and 2 of the WHG, the plan may only be established or approved if an impairment of the common good is not to be expected and other requirements of the WHG as well as other public-law provisions are fulfilled.