Act implementing tax-related EU Guidelines published

The new Act for the Implementation of Tax-Related EU Guidelines and for the Amendment of other Tax Provisions was formally published in April 2010 and, thus, is now effective. 

The Act mainly includes minor changes to German tax law, but certain provisions also affect corporate taxpayers:

• The declining balance method of depreciation is available for real property located in the EU/EEA (only relevant if real property is in a country where an applicable tax treaty with Germany provides for the credit method rather than the – widely used – exemption method for income from real property, e.g. treaties with Finland and Spain).
  
  Effective date: All assessments open for changes (but only for buildings constructed before 1 January 2006)

• Donations to charitable institutions in the EU/EEA are deductible.
  
  Effective date: All assessments open for changes

• The rules relating to the transfer of functions are relaxed (Law on Business Relocation still/again under discussion). The Act includes an exception from the general valuation principles for a “transfer package,” which allows a valuation based on individual values in certain cases.
  
  If the taxpayer lists at least one significant intangible asset transferred in a business restructuring, the amendment provides that the taxpayer may evaluate the transferred assets on a single asset basis, excluding a residual value such as goodwill associated with the transferred assets, thus avoiding the transfer package approach. It seems that this amendment eliminates the valuation approach introduced in the 2008 Corporate Tax Reform Act, since the transfer package approach no longer constitutes the standard, but rather the exception. 
  
  However, it remains to be seen whether and how the Federal Ministry of Finance (BMF) will interpret the change in law. Although the amendment should generally reduce the taxpayer time and effort in evaluating compensation for a transfer of functions, according to reports, representatives of the BMF are questioning whether an evaluation on a single asset basis actually excludes a residual value such as goodwill. Therefore, further guidance from the BMF is expected, which hopefully will provide some legal certainty.
  
  Effective date: Retroactively from 1 January 2008

If you have any questions, please contact the authors of this article at gtln@deloitte.de or your regular Deloitte contact.