Investitionsabzugsbetrag BEPS, Country-by-Country-Reporting, Umsatzsteuer, R&D tax credit, CFC rules

CFC rules may violate EU law in cases involving third countries

Final judgment handed down by the Federal Tax Court in the legal matter of X GmbH (I R 11/19)

The German CFC rules have sharp teeth that are often overlooked or underestimated in practice. For one thing, the low-tax threshold is (too) high – currently still 25% – and, for another, the CFC rules even apply to foreign passive investment income (FPII) in mini-shareholdings – from 1% and possibly even less. In EU/EEA cases, […]
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Emittentenleitfaden Ad-hoc-Publizität, Dividendeneinkünfte, Quick Fixes, ATAD, lump-sum taxation

New German lump-sum taxation regime for wages of employees with limited tax liability

Change of German Income Tax Act allows lump-sum taxation of wage payments to employees with limited tax liability

On November 22, 2019 the German Bundesrat approved Germany’s Third Bureaucracy Relief Act (Drittes Bürokratieentlastungsgesetz 2019). With this act, the legislature added a subsection 7 to Sec. 40a of the German Income Tax Act (ITA), which allows lump-sum taxation of wage payments to employees with limited tax liability at a rate of 30% from 2020 […]
Gemeinnützigkeitsrecht

Withholding tax on German dividends

CJEU rules that withholding tax on German dividends paid to foreign pension funds restricts the free movement of capital

The Court of Justice of the European Union (CJEU) recently ruled that German withholding tax on dividends from domestic corporations to nonresident pension funds may restrict the free movement of capital (C-641/17, College Pension Plan of British Columbia v Finanzamt München Abteilung III). Foreign pension funds affected should be able to reclaim German taxes on […]
Gesellschaftsrecht, Genossenschaftsrecht

German transfer pricing case on shareholder loans

German tax court allows adjustment not only to controlled transaction price, but also to other underlying conditions

The Federal Tax Court’s landmark decision of 27 February 2019 will significantly change the way that the arm’s length principle is applied in Germany. The ruling affects the scope of the term ‘conditions’ in German transfer pricing rules and arm’s length requirements for shareholder loans. This case is of great practical relevance because shareholder loans […]
Vorsteuerabzug Umwandlung, Deutscher Corporate Governance Kodex, ARUG II

Implementation of new mandatory reporting rules (DAC6) – current status in the EU

EU Member States are obliged to transpose mandatory reporting rules for tax planning schemes into domestic law

On 25 May 2018 the EU Council published a directive amending Directive 2011/16/EU on the automatic exchange of information, which is known as DAC6. The amendment refers to the introduction of a new reporting obligation for cross-border tax arrangements that may potentially be regarded as aggressive and politically undesirable. EU-wide implementation of new mandatory disclosure […]
DAC6

Annual Tax Act 2019 tightens withholding obligation for economic employers in Germany

German companies with secondees from affiliates abroad obliged to check requirements of economic employer more carefully

On November 29 the German Bundesrat approved Germany’s Annual Tax Act 2019 (Gesetz zur weiteren steuerlichen Förderung der Elektromobilität und zur Änderung weiterer steuerlicher Vorschriften “Jahressteuergesetz 2019” – “JStG 2019”). The JStG 2019 tightens the obligation of economic employers to withhold wage tax pursuant to Sec. 38(1) sentence 2 of the German Income Tax Act […]
Investitionsabzugsbetrag BEPS, Country-by-Country-Reporting, Umsatzsteuer, R&D tax credit, CFC rules

New R&D tax credit in Germany

Research Allowance Act aims to strengthen Germany as a business location and to attract settlements and investments

Subject to the approval of the German Bundesrat (upper house), the Research Allowance Act (Forschungszulagengesetz – FZulG) will enter into force on 1 January 2020. The bill conforms with the requirements of EU state aid law. Put simply, the new R&D tax credit or research allowance is available for personnel expenses and fees for subcontracting […]
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Grunderwerbsteuer Entstrickung, wohnsitz, Steuerrecht, Zinsaufwendungen, Zinsschranke, Mitteilungspflicht grenzüberschreitende Steuergestaltung, Anti-treaty shopping rule, CbCR

Anti-treaty shopping rule: German tax court lowers substance requirements

Tax court of Cologne decides that former version of Sec. 50d(3) ITA applies only to a limited extent to interest payments in a treaty context

The German anti-treaty shopping rule under Sec. 50d(3) of the German Income Tax Act (ITA) is designed to prevent abusive relief from withholding tax on dividends and interest. It is highly controversial, and the European Court of Justice has found that it conflicts with European law, particularly with regard to EU dividends. On January 23, […]
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DCGK, Corporate Governance Kodex, Garantieversprechen, DAC6, Quick Fixes, Forschungszulage

What companies should know about the implementation of new EU mandatory reporting rules (DAC6) in Germany

German Ministry of Finance published a draft law for new reporting obligation for cross-border tax structures

On 25 May 2018 the EU Council published a directive (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0822) amending Directive 2011/16/EU on the automatic exchange of information, which is known as DAC6. The amendment refers to the introduction of a new reporting obligation for cross-border tax arrangements that may potentially be regarded as aggressive and politically undesirable. The EU Member States are […]
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