“I am resigning my post as federal president with immediate effect” – on May 31st, for the first time in the history of the Federal Republic of Germany, a president resigned from his office. Federal president Horst Köhler, 67, accounts for his decision to resign with a lack of respect for the president’s office he had perceived. Continue →

The Islandic erupting volcano and the resulting grounding of flights pressure the 27 EU-States. The “regional” Sky is still a tentatively watched point of national interest. At least the EU member states were finally able to agree on the three-zones model by the European flight control agency Eurocontrol and the volcanic ash institution VAAC. Eyjafjallajökull is continuously spewing forth ash clouds – the last previous eruption lasting for two years – forcing airports and airlines alike to get used to spontaneously closed air traffic. Passengers would be advised to not only inform themselves about the position of the ash cloud, but also about their rights. Continue →

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 →

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 →

Germany’s premier drug store chain “Schlecker” has deemed its corporate structure too ineffective to continue in the changing German market. In 2004, with its overwhelming share of the drug store market crumbling, a restructuring of a large number of small stores seemed to be too great a burden for Germany’s largest drug retailer leading, instead, to the closure of around 1000 outlets. Recently Anton Schlecker, the owner of the drug-store chain, stated in Manager Magazine that a complete overhaul of Schlecker’s business structure is once again needed.

Since the start of its downfall in 2004, the company has experienced mostly Continue →

On February 8th, 2010, the Bundesverfassungsgericht declared the Hartz 4 social legislation for unemployed benefits and similar welfare acts, enacted as part of the Agenda 2010 reform package, unconstitutional. While this is not one of our usual economic topics, it’s repercussions for the Nation are as severe as any. Continue →