Tax & Legal

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    Tax & Legal

      Amendment of tax loss utilisation rules for corporations

      Under certain conditions, changes in shareholders and the admission of new investors will in future be possible without giving rise to a forfeiture of losses carried-forward. On 23 December 2016 the Act for the Further Development of Tax Loss Utilisation for Corporations was published after having been adopted by the German Parliament (Bundestag and Bundesrat) on 20 December 2016.


      Tax exempt assumption of liabilities

      Where an entrepreneur undertakes to enter into a tenancy (landlord and tenant) for a consideration, the supply is tax exempt according to Section 4 No. 8 (g) VAT Act.

      The procurement and assumption of liabilities, sureties and guarantees as well as the administration of securities by the creditor are VAT exempt according to applicable EU law. This exemption has its derivation in financial services (cf. the ECJ decision Velvet & Steel Immobilien from 19 April 2007 –  C-455/05).

      German Government adopts bill to combat tax avoidance.

      On 21 December the German government adopted a bill to combat tax avoidance and to change certain other tax provisions. The Government’s main intention is to make it more difficult for German taxpayers to avoid tax by using letter-box companies. In addition to numerous provisions imposing obligations on the taxpayer to co-operate with the tax authorities, the bill abolishes the bank secrecy rules.

      The aim of the new bill is to enable the tax authorities to obtain detailed information about business relationships between German taxpayers and letter-box firms in tax havens and to that end to provide the tax authorities with new investigatory powers.

      Restriction of tax relief on royalty payments: draft bill released as part of the efforts to combat harmful tax practices

      On 20 December 2016 the German government published a draft bill proposing a restriction of tax relief on royalty payments made to related parties from 2018 onwards.

      According to the proposal, the deduction of expenses for royalty payments made to related parties is to be restricted, where:

      • the corresponding royalty income is subject to a preferential tax treatment (for example patent box or other IP regimes), in the hands of the related party; and
      • the effective taxation of the royalty income is below 25%.

      If these two foregoing conditions are met, relief will not be available to the extent the effective tax rate is below 25%.

      Bundesrat gives its assent to the packet of measures against profit reduction and profit shifting.

      In its last session of the year, the Federal Assembly (Bundesrat) gave its assent today to the Act to Implement the Amendments to the EU Mutual Assistance Directive and to Introduce Further Measures to Combat Profit Reduction and Profit Shifting

      This packet of measures, which will come into effect on 1 January 2017, will give almost € 25 billion worth of relief to taxpayers. In particular low earners, families and lone parents will benefit.

      The Bundesrat also gave its assent to the law amending the rules regarding the utilisation of losses upon change of control. (See our Blog: