PwC

Tax & Legal

    Tax & Legal

    OECD publishes International VAT/GST Guidelines


    The International VAT/GST Guidelines now published present a set of internationally agreed standards and recommended approaches to address the issues that arise from the uncoordinated application of national VAT systems in the context of international trade. The Guidelines were adopted as a Recommendation by the Council of the OECD in September 2016.

    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:  http://blogs.pwc.de/german-tax-and-legal-news/2016/12/06/bundesrat-set-to-approve-draft-for-relief-from-curtailment-of-loss-utilization)

    Impact of tax treaty definitions on domestic law


    The Supreme Tax Court held, in a decision published on 19 October 2016, that the term “permanent establishment” set out in Section 9 No. 3 of the Trade Tax Act should follow the domestic law definition and not the tax treaty definition.

    The taxpayer, a GmbH, carried on business as an import agent; specificaly it acted as the agent for another GmbH, sourcing all its goods from Turkey. The company had no other income source save for the provisions received. For this purpose, the taxpayer kept a purchasing office in Turkey.

    Tax neutral repayment of capital contributions by companies tax resident outside the EU also possible


    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).

    Further relief from curtailment of loss utilization planned


    The present curtailment of loss relief on changes of shareholders shall be modified to allow for a continued utilization of losses, provided the business operation does not change. The German government has taken the initiative and – for this purpose – agreed on a draft law. The respective draft was published on September 14, 2016.

    No insurance tax for warranty risks on construction work abroad insured within EU/EEA


    The Supreme Tax Court has held that insurance taken out with an EU/EEA insurer to cover warranty risks on a plant constructed outside Germany is free of insurance tax. However, the same insurance taken out with a non-EU/EEA insurer is subject to the tax if the insured person is a domestic legal or natural person.