The ECJ held that an exempt intra-community supply should not be taxable merely because of a missing VAT registration No. where there is no suggestion of evasion and the other conditions for exemption are fulfilled.
Tax & Legal
The transfer of shares to German-residents shareholder as part of a US spin-off generally constitutes investment income under Section 20 (1) No. 1 of the Income Tax Act (ITA); Section 20 (1) No. 1 Sentence 3 ITA is to be interpreted in line with EU law, so that companies resident outside the EU may also repay capital contributions on a tax neutral basis, even though they do not maintain a contributions account for tax purposes under Section 27 of the Corporation Tax Act (CTA).
In its committee meeting today (14 October 2016) the Federal Assembly (Bundesrat) approved the Gift Tax and Inheritance Tax reforms. With the majority approval of the Bundesrat, the new rules regarding the beneficial tax status of business heirs can be introduced.
With this approval a long parliamentary saga comes to an end. Back in 2014 the Federal Constitutional Court called on the government to introduce new rules by 30 June 2016.
Further information on the key points may be found here.
On 23 September 2016, the Federal Assembly (Bundesrat) gave its response to the draft of the Act to Implement the Amendments to the EU Mutual Assistance Directive and to Introduce Further Measures to Combat Profit Reduction and Profit Shifting (“the draft Act”) and proposed some further measures
On 12 October 2016 the Federal Government gave its response to the Bundesrat. Among others the following suggestions of the Bundesrat were adopted:
- Reintroduction of the taxation of short selling for private transactions;
- Statutory definition of professional activity under Section 32d ITA to be defined further;
The German anti- treaty shopping rule denying full or partial relief from withholding tax, as otherwise prescribed under a double tax treaty or applicable EU directive, is questioned by the Lower Tax Court of Cologne as being in violation of community law. The question has now been referred to the ECJ.
The ECJ held that the sale of blood plasma for the manufacture of medicines does not fall under the VAT exemption applicable to supplies of human blood. As a result a deduction of the underlying input VAT relating to the supply of plasma is available.
For the first time the German tax administration publicly raised the issue of an internal control system for tax purposes to ensure tax compliance. However, the corresponding Implementation Decree published on May 23, 2016 leaves many questions open and neglects to point out what the companies should be prepared for in the future.
At a sitting on 23 September 2016, the Federal Assembly (Bundesrat) has responded to the draft of the Act to Implement the Amendments to the EU Mutual Assistance Directive and to Introduce Further Measures to Combat Profit Reduction and Profit Shifting (“the draft Act”) and proposed further measures. The packet of measures was confirmed by the Cabinet on 13 July 2016 and is intended to implement some of the recommendations of the BEPS (Base Erosion and Profit Shifting) Action Plan of the OECD and also to implement the amendments to the EU Mutual Assistance Directive. Originally conceived as a means of improving transparency in favour of the tax authorities, the draft Act contains numerous further amendments, which could have important implications for business. The Bundesrat’s recommendations and requests for review must now be reviewed by the government. A brief description of the most significant recommendations follows:
The Members of the Arbitration Committee of the Federal Parliament (Bundestag) and the Federal Assembly (Bundesrat) have reached a compromise on the inheritance and gift tax reform after a seven hour session going on late into the night. Here is a summary of the key points.
A draft bill for the amendment of the Inheritance and Gift tax Act follow a decision of the German Constitutional Court in January 2015 has been in existence since 2015. On 24 June 2016 the Federal Parliament finally voted for the amendment after a long political process, only for the bill to be defeated in the Bundesrat, which called for the establishment of an arbitration committee. This committee has now arrived at a compromise, which must be confirmed by both the Bundestag and the Bundesrat. Here a summary:
The Lower Tax Court of Muenster held that losses incurred during the year in which a harmful change in shareholding took place can be carried back to the previous tax year.