On 26 March 2010, the German Bundesrat ratified the Act Regarding the Implementation of EC Tax-Law Guidelines Including Further Tax Regulations (Gesetz zur Umsetzung steuerrechtlicher EU-Vorgaben sowie weiterer steuerrechtlicher Regelungen).
The act is based on several decisions of the European Court of Justice published in 2009 which dealt with topics such as deductibility of donations Continue →
On 18 March 2010 the European Commission has initiated official treaty violation proceedings against Germany. According to the Commission, the anti-malpractice guidelines of Germanys Section 50d (3) EStG violates several liberties established in the EU treaty.
Section 50d (3) EStG was established to hinder taxpayers who have none or no complete titles for exemption of German withholding taxes from achieving such exemption by improperly interposing a foreign enterprise. Such an improper formation exists if
Ø There is no economical or otherwise apparent reason for the interposition of a foreign enterprise
Ø The foreign enterprise obtains not more than 10% of its entire gross proceeds in the concerned year from its own business activity or
Ø The foreign enterprise does not hold suitable business operations for its corporate objective to use them to participate in the general economic commerce.
The criticism of the commission was especially focused on the fact that there can very well be sufficient business activity below the 10% threshold. The Commission thus claims that there has to be a possibility of providing counter evidence to prove a foreign enterprise’s legitimacy.
On 4 March 2010, the German Federal Constitutional Court announced a decision from 27 January 2010 regarding the German trade tax (Gewerbesteuer).
The plaintiffs, two German municipalities located in the German state of Brandenburg, challenged a 2004 amendment to the German trade tax law which obligates municipalities to assess a minimum trade tax. The Federal Constitutional Court rejected the municipalities’ claim and held the regulation to be in conformance with the German constitution. Continue →
On 9 November 2009, the German government announced a draft Act for the Acceleration of Economic Growth (Gesetz zur Beschleunigung des Wirtschaftswachstums or Wachstumsbeschleunigungsgesetz, hereinafter the “Economic Growth Act”.
This act is intended to implement some of the election pledges of the newly elected coalition government. The Economic Growth Act therefore contains several amendments to recent legislation intended to limit the negative consequences to the German economy resulting from the current economic crisis. Continue →
On 4 November 2009, the German Federal Finance Court published a decision from 25 August 2009 in which it held that the so-called “exit tax” imposed by Sec. 6 of the Foreign Tax Act (Außensteuergesetz or AStG), is compatible with the German Constitution and European law.
In the case under consideration, two spouses each held more than 25% of the shares of two German public limited companies Continue →
The coalition agreement concluded by the CDU (Christian Democratic Union), the CSU (Christian Social Union) and the FDP (Free Democratic Party) following the recent federal elections contains several taxation measures which are planned for the near future.
One such measure is the German Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz, ErbStG), which was subject to major amendments effective as of 01.01.2009 and is to be amended again in regard to Continue →
In early October, the Finance Court of Cologne published its decision of 7 July 2009 regarding the lawfulness of short-term tax audits.
In the case under consideration, the taxpayer was classified as a “large” firm based on its profit and turnover. The local tax authority chose the plaintiff for a tax audit that would cover only the year 2007. The plaintiff appealed against the order asking for a preliminary injunction (vorläufiger Rechtsschutz) against the conduct of the tax audit. Continue →
On 23 September 2009, the German Federal Fiscal Court published a decision from 24 June 2009 in which it held that the German tax authorities’ right to request data within the scope of a tax audit does not exceed the taxpayer’s obligation to keep records and that the tax authorities have no right to demand additional data which a taxpayer creates voluntarily if such data is not required by law.
In the case under consideration, the taxpayer kept records to the extent legally required and also used an electronic accounting system. Within the scope of a tax audit, the tax authority requested data in the form of the electronic accounts kept for 2002 and 2003. Continue →
The German Foreign Relations Tax Act (Außensteuergesetz or AStG) contains the general rules for applying Germany’s transfer pricing regime and for determining income from cross-border transactions between related parties. In 2008, the AStG was amended by adding new Sec. 1(3), which contains rules on the transfer of business functions abroad, which are subject to transfer pricing principles under German tax law. For clarification purposes, the amended act was accompanied by Function Transfer Regulations (Funktionsverlagerungsverordnung or FVerlV) issued by the German Federal Ministry of Finance (Bundesministerium der Finanzen or BMF). Continue →
On 21 July 2009 Germany terminated the Agreement between the Federal Republic of Germany and the Republic of Turkey for the Avoidance of Double Taxation with respect to Taxes on Income and Capital which was concluded on 16 April 1985.
On 24 August 2009, the Federal Government announced its reasons for the move, stating that the double taxation convention (“DTC”) was outdated and unbalanced. Germany had entered into negotiations with Turkey to amend the DTC to bring it more in line with the OECD Model Convention Continue →
