The time has come to say goodbye: Today UK Prime Minister Theresa May formally invoked Article 50 of the Lisbon Treaty thus initiating the formal negotiations for her country’s departure from the European Union. A PwC special report looks at the potential outcome with respect to tax, legal and people.
Tax & Legal
A successful conclusion of a long negotiating process: The TFA, short for Trade Facilitation Agreement, entered into force on 22 February 2017 and brings along a number of improvements mainly in trading with developing countries. It is hailed as the greatest success since the founding of the WTO, the World Trade Organization, and shows the commitment of the members for a multilateral trading System.
On 22 February 2017 the federal government approved a draft bill to implement both the fourth EU money laundering directive and the EU regulation on the transfer of funds as well as to reorganise the Central Financial Transactions Investigation Agency. The intention is to up-date and strengthen measures developed to prevent money laundering and the financing of terrorism.
The Central Financial Transactions Investigation Agency (“Zentralstelle für Finanztransaktionsuntersuchungen” – “FIU”) will be restructured and will obtain more staff
On 25 January 2017 the federal government approved a draft of the Act to Combat Harmful Tax Practices in connection with the Licensing of Rights. The intention is to prevent multinational businesses from transferring their royalty income to countries, which offer such income preferential treatment. Such preferential tax regimes (so-called Licence Boxes, Patent Boxes or IP-Boxes) are considered not to meet the demands of the OECD and G20 BEPS Project. A new provision is to be introduced to the Income Tax Act (ITA) for this purpose; the new provision should be applied to expenses arising after 31 December 2017.
2017 seems to be the year for tax reform: There are currently major changes to the US tax system discussed that may also have a significant impact on German companies. German tax consequences of potential restructurings in response to the upcoming US tax reform must therefore be considered already at an early stage and the current developments be constantly monitored.
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.
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.
On 25 January 2017 the German government published a draft bill proposing a restriction of tax relief on royalty payments made to related parties from 2018 onwards.
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;