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Tax & Legal

Tax & Legal

Country-by-Country Reports: German Ministry of Finance releases circular.


On 20 December 2016 legislation was passed introducing measures to combat base erosion and profit shifting. A part of this legislation – introduced in the new Section 138a of the General Tax Code – imposed an obligation on multinational enterprises to report annually for each tax jurisdiction in which they do business, so-called Country-by-Country (CbC) reports. On 11 July 2017 the German Ministry of Finance released a circular, which provides some guidelines on the completion of the CbC reports. Continue reading

Multilateral Convention to counter aggressive tax avoidance arrangements has been signed.


On 7 June 2017 Germany together with the representatives of over 60 countries signed the multilateral convention, which should transpose the main recommendations of the G20/OECD Project against Base Erosion and Profit Shifting (BEPS Project) into existing bilateral tax treaties. Continue reading

Bundesrat approves legislation introducing restrictions on the deduction of royalty payments


In its sitting on 2 June 2017 the Bundesrat (the Upper House) approved the Act to Combat Harmful Tax Practices in connection with the Licensing of Rights. The new legislation is intended 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. The new provision should be applied to expenses arising after 31 December 2017 and is to be introduced by way of a new provision in the Income Tax Act (ITA). Continue reading

No deduction of final branch losses following EU law.


Payments made to a purchaser to compensate for a poor economic position following the transfer of an interest in a partnership may not be deducted from the domestic tax base to the extent they are attributable to a foreign branch (i.e. a permanent establishment for tax treaty purposes) of the partnership. In its decision the Supreme Tax Court cited a decision of the European Court of Justice (ECJ) from 2015. Continue reading

New Ministry of Finance Circular planned: Federal Government and Federal States agree upon a Revision of the Treatment of Cum/Cum Transactions.


The federal government and federal states have agreed unanimously upon the criteria for a revision of the tax treatment of existing cum/cum structures. The tax authorities of the federal states could then – according to comprehensive and standardised criteria – attack cum/cum transactions, which were executed before the change in the law as at 31 December 2015.

The agreement was reached when the heads of the tax departments of the respective federal and states Ministries of Finance met in Berlin between 1 and 3 March 2017. A new Ministry of Finance circular will be prepared to implement the decision. The existing Ministry of Finance circular of 11 November 2016 will continue to apply to the beneficial attribution of securities transactions.

Federal cabinet approves new rules as part of the fight against money laundering and financing of terrorism


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

Previously the FIU was known as the Central Authority for Suspect Reporting (“Zentralamt für Verdachtsmeldungen”) at the Federal Police Department within the Ministry of the Interior. It will now be transferred to the General Customs Directorate, i.e. within the Ministry of Finance. Furthermore its responsibilities and competencies will be revised according to the provisions of the fourth EU directive on money laundering. One area of focus will lie in operative and strategic analysis.

In addition the FIU should, for the first time, have a filter function, the aim of which is to reduce the burden on the prosecution authorities. In future only credible suspicions should be passed on to the prosecutor.

Draft bill lays the foundations for a central electronic transparency register

This is intended to disclose information on the beneficial owners of an enterprise. The aim being more transparency and thus to hinder the abusive use of companies and trusts for the purpose of money laundering and offences underlying it, such as tax evasion and the financing of terrorism. The bureaucracy for businesses should however be kept at a minimum by the utilising information on any interests held already available in existing registers, such as the commercial register.

Penalty levels to be significantly increased

Penalties for serious, repeated and systematic offending are to be significantly increased to secure compliance with the money laundering regulations. Furthermore, in future the authorities will publish all penalty notices, which can no longer be disputed, on their website.

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)