The preclusion period for electronic input tax refund will elapse at the end of this month.

Since the beginning of the year, VAT amounts due in EU member countries other than the one in which the entrepreneur is located can only be refunded via an electronic application system. In spite of massive EU wide technical difficulties with this system, the deadline will remain on 30th of September 2010. Even though the European Commission did propose an elongation of the deadline (see this article on our blog), the proposition was not processed at the recent ECOFIN session on September 7th. ECOFIN’s informal session at the end of this month is also not expected to bear results in this regard. It is highly unlikely that there will be a retroactive extension of the deadline in any future meetings of the committee.

Eligible businesses should therefore, in their own best interest, file the necessary applications within this month.

On 14.07.2010 the EU-Commission has proposed a change of the so called VAT-refund policy (2008/9/EG) to give tax payers more time for the submission of electronic input-tax refund applications.

According to the refund policy, non-EU-resident tax payers can apply for a refund of the VAT on business expenses in a member state via an electronic website, set up by said individual member state. This method was chosen to succeed the previous, more convoluted method. This method required the filing of the application in the precise state the input tax originated – which usually meant having to deal with forms in different European languages and keeping different deadlines and procedural rules in mind.

Germany has already converted to the electronic input-tax refund system on January 1st 2010. Due to this, as of 2009 input tax refunds can be applied for electronically. The original preclusion period of the input-tax refund system was thus prolonged by three months, leaving it at the 30th of September of the following year.

Every member state had to have its web portal online by the 1st. of January 2010, but some have experienced technical difficulties in the inception. To protect the right of taxpayers for VAT refunds, the EU commission is now proposing an additional extension of the deadlines for applications from 30.09.2010 to 31.03.2011.

The German value-added tax system knows two rates of taxation:

• The regular tax rate of 19% and
• The reduced tax rate of 7%.

Amongst others this reduced tax rate includes the delivery of forest and agricultural products, comestible goods and print media, and thus mainly serves a social function. Constant changes of these categories have lead to an increasing complexity of the system.

Due to these increasing difficulties and redundancies, the Bundesrechnungshof (German Federal Court of Auditors) has proposed a complete overhaul of the VAT system. The Bundesrechnungshof propositions include a list of future organisational models for tax rebate in the form of a briefing. Any of the reduced tax rate cases should be investigated individually and receive critical review.

There have been numerous Bundesrechnungshof reviews on the range of application of reduced tax rates, which lead to the only possible conclusion that a number of these largely venerated privileges are no longer objectively justifiable.

The third topic Mr. Peter Dehnen dealt with during his participation in the ABA´s 10th Annual Tax Planning Strategies Conference in Copenhagen are the forms of cooperation for tax purposes in Germany.

Details can be found in the attached written paper.

Read the complete article.

Regarding the limits of information gathering within taxation proceedings, German Fiscal Courts regularly held that information, which the tax payer is not obliged to document, cannot be asked for by the tax authorities.

As a result German legislation became increasingly complex and extensively requires tax payers to document and provide proof, e.g. payment of interest, fees and commissions across borders. Regulations on data support in terms of transfer pricing can be regarded as climax of that tendency.

For more see the written paper on Mr. Peter Dehnen´s speech on Transfer Pricing at ABA´s 10th Annual Tax Planning Strategies Conference.

Read the complete article.

Mr. Peter H. Dehnen served on the “Governments and Information Gathering: Impact on MNE Planning” panel at the ABA sponsored 10th. Annual Tax Planning Strategies Conference in Copenhagen. His first issue to speak on was “Reporting by Corporations as part of German Compliance Requirements”.

Outlining the system of German reporting obligations for corporations, Mr. Dehnen emphasized aspects such as the Financial Reporting Enforcement Panel, which is also known as “Balance Sheet Police” as well as German governmental information gathering in terms of the tax assessment proceedings vs. “corporate privacy”.

For further details find attached the written paper on the matter.

Read the complete article.

The CEO and founder of Dehnen.Lawyers, Peter Dehnen, will be serving on the “Governments and Information Gathering: Impact on MNE Planning” panel at the ABA sponsored 10th. Annual Tax Planning Strategies Conference in Copenhagen. The issues, which we will cover on this newsletter in the future, include

• Reporting by Corporations as part of German Compliance Requirements
• Data in Support of Transfer Pricing - Quantification Requirements to Support Deductions in Germany
• Forms of Cooperation for Tax Purposes in Germany

Peter H. Dehnen is a corporate and international tax lawyer and partner of the law firm DEHNEN.Lawyers which provides legal and tax consulting to German and international businesses. Mr. Dehnen has developed extensive competence in areas such as corporate and individual tax and estate planning, international business transactions, Corporate Governance and Corporate Compliance. He is a qualified German tax attorney and also admitted to the Washington, D.C. Bar as a Special Legal Consultant. Mr. Dehnen advices German and international executives on legal, tax, legislative and policy issues impacting Germany.

You can look forward to these three very extensively covered topics in the new editions of our GermanTaxNews.

The controlling influence of the German fiscal offices over a taxpayer´s financial situation is getting more efficient with every day. Additionally, the amendments of various Double Taxation Agreements as well as agreements on the the purchase of Liechtenstein and Swiss data cd´s

Therefore, some German tax payers may think about using the instrument of voluntary disclosure to the tax offices – which will guarantee an exemption from punishment, but might just get very expensive. The interest rate on evaded taxes amounts to 0,5% per month of evasion, or 6% a year. The period for the calculation of interest begins at the date of the former tax assessment missing the now disclosed capital yield and ends on the day the back taxes are paid. Continue →

In 2009, the Citizen Relief Act amended the so-called Mantelkauf regulation which places various restrictions on the use of loss carry-forwards of companies acquired in share-purchase arrangements. The amendment to the regulation implemented a restructuring exception, initially valid for two years, which was intended to ease the restrictions in order to facilitate company restructurings during the current economic crisis. Continue →

On 29 March 2010, the German Federal Ministry of Finance published its draft of the 2010 Annual Tax Law Act (Jahressteuergesetz 2010 or JStG 2010).

It should be noted that, in addition to specific tax acts which generally only deal with one substantive matter, the German legislature regularly (more or less annually) introduces tax acts which deal with various unrelated matters regarding several types of taxation. Continue →