The German Lower House has adopted the “Draft Act for Implementation of the Directive on the EU Recovery of Tax Claims” on 27 October 2011 which also includes an amendment of the German anti-treaty shopping rule. The proposed change to the anti-treaty shopping rule comes as a reaction to infringement proceedings which had been initiated by the EC Commission previously (see Deloitte Tax-News) and aims at making the anti-treaty shopping rule compliant with European Court of Justice (ECJ) case law.
The wording of the anti-treaty shopping rule which has now been adopted is unchanged from the draft which was proposed by the German government in the summer. For a detailed discussion of the draft please see Deloitte Tax-News. The fact that a company intending to obtain withholding tax relief is no longer obliged to demonstrate that at least 10 % of its gross receipts are derived from own business activity is the most important change to the rule.
The amended anti-treaty shopping rule shall enter into effect from 1 January 2012.
Taxpayers who have not qualified for withholding tax relief under current the rule and have thus not filed for withholding tax relief in the past should consider filing for withholding tax relief also for the years since 2007 if they meet the requirements under the amended rule. Such refund claims should be based on the argument that the requirements under the current anti-treaty shopping rule are not in line with EU law. Claims for dividends paid in 2007 will have to be made by 31 December 2011.
The Draft Act for Implementation of the Directive on the EU Recovery of Tax Claims will now still have to be adopted by the German Upper House (currently scheduled for 25 November 2011) and signed by the president.
If you have any questions, please contact the authors of this article at gtln@deloitte.de or your regular Deloitte contact.
