Tax & Legal

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    Tax & Legal

      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:

      Insolvency: no right of protection for legitimate expectations following an enforcement of a VAT claim

      VAT claims may also be asserted in insolvency proceedings against a GmbH, if the GmbH, which had previously been treated as a controlled company in a fiscal unity (Organschaft), which was subsequently not deemed to exist, actually received the VAT owed by it from the assumed controlling company (Organträger). According to the Federal Tax Court, no protection of legal expectations may be claimed in this situation despite a change in the application of the law on the Organschaft through a decision of the Supreme Tax Court in the interim.

      Tax authorities register a VAT claim in the insolvency table

      Federal Ministry of Finance publishes draft bill to combat tax avoidance

      The Federal Ministry of Finance has published its draft bill to combat tax avoidance and to amend further tax provisions. Through this draft bill, the prime goal of the Federal Government is to make it more difficult for domestic taxpayers to avoid tax through the use of an offshore company. In addition to increasing the taxpayer’s obligations to cooperate, the new draft also proposes an end to bank secrecy in tax matters. The cabinet will probably give its approval to the draft bill on 21 December 2016.

      Deadline for the filing of an application for recording at tax book values in the case of a contribution

      The Supreme Tax Court held, in a decision published on 27 October 2016, that:

      • In the case of a contribution and a share exchange, the transferee entity must file its application to be permitted to record the contributed asset at a value below its fair market value before it submits its “end-of-period tax balance sheet”(the term applied in Section 20 (2) 3rd Sentence of the Tax Reorganisations Act 2006). The term “end-of-period tax balance sheet” means the transferee’s end-of-period tax balance sheet for the period in which the date of the contribution fell.

      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.