Tax & Legal

On 14 May 2024 the Council reached an agreement (general approach) on safer and faster procedures to obtain double taxation relief, which will help boost cross-border investment and help fight tax abuse.

On 19 June 2023 the European Commission proposed new rules to make withholding tax procedures in the EU more efficient and secure for investors, financial intermediaries (e.g., banks) and Member State tax administrations. This initiative is aimed to promote fairer taxation, fight tax fraud, and support cross-border investment throughout the EU.

The transfer of know-how by a foreign creditor for an unlimited period may lead to limited income tax liability in Germany by way of tax withholding. The fact that the know-how must be used domestically in order to trigger German withholding tax does, according to the Supreme Tax Court, not require that the know-how also had the specified scope, substance and quality to fulfill the purposes pursued in the domestic market.

The Regional Tax Court of Hesse held that withholding tax levied in Canada on dividends distributed by a Canadian corporation to a German corporation should be credited against German trade tax. The tax authorities have in the meantime launched an appeal against this judgment and the case is now pending before the Supreme Tax Court for final clarification.

In a recent ruling, the Supreme Tax Court held that the deemed settlement of final withholding tax under Section 43 (5) Sentence 1, Half-Sentence 1 Income Tax Act (ITA) also applies if the tax has been withheld by the debtor (payer) of the investment income, but not declared and paid over to the tax office. As a result, investment income from a fraudulent pyramid scheme is in principle no longer to be included in the income tax base.

The Federal Ministry of Finance has officially clarified in a circular published in April that fees or remunerations paid for the placement of online advertising are not subject to German withholding tax under Section 50a paragraph 1 No. 3 Income Tax Act.

On 11 December 2017 the European Commission put forward new guidelines on withholding taxes to help Member States reduce costs and simplify procedures for cross-border investors in the EU.

An ECJ advocate general has suggested that a tax treaty can justify a hindrance on the free movement of capital from granting a tax credit privilege to recipients of a dividend from a third country but not to those with dividends from a member state.

The finance ministry has reissued its slightly modified regulations to be followed by those responsible for deducting tax on investment income at source.

The supreme Tax Court has held that a tax office opinion on tax to be withheld from employees’ salaries should address the facts as presented and should not be obviously incorrect. However, the employer cannot use the procedure for the clarification of legal doubts.

The Supreme Tax Court has held that the leasing fees paid to a Liechtenstein company for a German registered lorry are only subject to (withholding) tax to the extent the vehicle is actually used in Germany.

The finance ministry has announced the arrangements for claiming withholding tax exemption under the EU Parent/Subsidiary Directive on dividends on shares held in the custody of a bank.

The finance ministry has issued two decrees on the procedures to be followed during 2013, the introductory period for the online administration and reporting of employee wage withholding tax.

France, Germany, Italy, Spain, the UK and the USA have prepared a model bilateral treaty for the mutual exchange of information on bank accounts held by residents of the other country. Compliance with the treaty would absolve financial institutions from their own specific US reporting requirements under FATCA.

The ECJ has held that the withholding tax on a royalty paid to a corporation in another EU country may not be more than the corporation tax rate applied to the income less the directly related costs.

The Supreme Tax Court has followed an ECJ case in holding that a foreign corporate shareholder may claim from the local tax office a refund of the tax deducted at source from its dividend.

The finance ministry has published the text of a treaty signed with Switzerland to ensure German level withholding tax on investment income, whilst protecting those who choose to move their undeclared funds to a third country. Germany continues  to broadly accept Swiss banking secrecy.

The finance ministry has issued a decree on the expense deduction from the income of EEA residents subject to withholding tax.

The finance ministry has issued a decree on a number of technical points in connection with the obligation of banks to withhold tax from the investment income of private individuals.

The finance ministry has published an extensive decree on the procedures to be followed when accounting for withholding taxes on the fees paid to non-resident artists, athletes, actors and entertainers.