On 27 April 2017, the German lower house of parliament (Bundestag) passed the bill that would limit the deductibility of certain related party royalty payments. The bill (which would introduce a new section 4j in the Income Tax Code) generally is based on a draft law published by the federal ministry of finance on 19 December 2016 (for prior coverage, see GTLN dated 20 December 2016 and GTLN dated 8 February 2017).
The draft law targets royalty payments made to a nonresident that result in “low taxation” of the royalty income at the level of the recipient due to the application of an intellectual property (IP) regime (i.e. IP box, patent box, license box, etc.), where the IP regime is not based on the “nexus approach” as described in action 5 of the OECD’s BEPS project (“Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance”).
The draft law passed by the Lower House is identical to the December 2016 version, but includes the following updates:
In addition to the rule on royalty payments, the lower house passed a new rule that would introduce a beneficial tax regime for certain restructuring profits. A “restructuring profit” would arise when a creditor waives (in whole or in part) its debt claims against a distressed business entity to enable a successful restructuring of the business. In a decision dated 28 November 2016 (see GTLN dated 29 March 2017), the Federal Tax Court rejected the “restructuring decree” issued by the Federal Ministry of Finance, concluding that the tax benefits granted by the decree with respect to the treatment of restructuring profits violate a constitutional principle for administrative actions. The decree granted a general exemption from tax that otherwise would be payable on a restructuring profit in certain cases. The legislator intends to reinstate the beneficial tax treatment for restructuring profits, albeit with certain modifications, as compared to the restructuring decree. The European Commission will need to be notified for Germany to obtain clearance from an EU state aid perspective.
The upper house of parliament (Bundesrat) now must vote on the draft, which is expected to take place on 2 June 2017—approval of the upper house is likely
|Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.
This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.