Information only in English
On 25 November 2011, the Upper House finally adopted the Act on Implementation of Directive on the EU Recovery of Tax Claims. The Act was published in the Official Gazette on 13 December 2011 and applies as from that date. The most important changes affecting business taxation are the following:
- Amendment of the anti-treaty shopping rule: Following the initiation of an infringement procedure, Germany amended its anti-treaty shopping rule in section 50d para 3 of the Income Tax Act. In particular, the requirement to demonstrate that the foreign recipient derives at least 10 % of its gross receipts from its own business activities has been eliminated. For a detailed analysis see Deloitte Tax-News. The new rule applies as from 1 January 2012.
- Exception from change-in-ownership rules for ailing companies: After the European Commission concluded that the exception for ailing companies from the strict change-in-ownership rule constituted illegal state aid, Germany considered abolishing the measure. However, because the Commission’s decision is being challenged before the European Court of First Instance, the exception will be suspended during the court proceedings. If a final court decision overrules the Commission’s finding, the exception will enter back into effect.
- Gift Tax: Changes to the Inheritance and Gift Tax Act resolve issues created by tax authority guidance issued as to whether deemed distributions and deemed contributions into corporations can lead to gift tax liability (see Deloitte Tax-News). According to the revised rules, increasing the value of another shareholder’s shares by disproportionate contributions to a corporation will trigger gift tax if the person that (indirectly) benefits from the contribution is an individual or a foundation. The law change targets abusive schemes for avoiding gift tax by transferring funds to be donated to a corporation commonly held by the donor and the donee.
The revised rule mitigates the risk that gift tax will be triggered on non-arm’s length dealings between group companies by the introduction of a group clause. Transfers between group companies will trigger gift tax only if (i) the dealings intend to enrich shareholder(s) of the favored corporation, and (ii) both corporations involved do not have the same pro rata ownership structure (lack of “shareholder identity”). This provision applies to all transfers following the date the law is officially published.
The Act also includes minor changes that are mainly relevant for individuals.
If you have any questions, please contact the authors of this article at gtln@deloitte.de or your regular Deloitte contact.
