The distribution of profits by a Luxembourg subsidiary (in the legal form of a SARL) to its German parent company (a partnership limited by shares – KGaA) may be an abuse of legal forms where the KGaA provided SARL with a loan and shortly thereafter waived repayment, thereby putting SARL in a position to actually make the profit distribution. Even more when the losses arising from the impairment of the value of SARL because of the distribution are to be used by the shareholders in a tax-effective manner.
Congress on December 20, 2017 gave final approval to the House and Senate conference committee agreement on tax reform legislation that would lower business and individual tax rates, modernize US international tax rules, and provide the most significant overhaul of the US tax code in more than 30 years. President Trump signed the tax bill on 22 December 2017.
The finance ministry has confirmed its interpretation of the Norwegian DTT to the effect that dividends received by a German company on a holding of 25% or more are free of German taxation.
In a request for a preliminary ruling from Italy, the European Court of Justice (ECJ) held that a national legislation providing for tax being levied on more than 5% of the amount of the dividends that financial intermediaries receive, as parent companies, from their subsidiaries resident in other Member States is contrary to EU law. This also applies in the case of a tax which is not a tax on corporate income but which includes in its basis of assessment those dividends or a part thereof.
According to a decision of the Supreme Tax Court, the dividend income exemption for trade tax on qualifying shareholdings is also available for distributions of companies of foreign legal form with its statutory (registered) seat abroad, provided the foreign company is comparable to a German corporation, has its place of management in Germany and therefore maintains a permanent establishment there.
In a recent judgment, the Supreme Tax Court held that Section 8b (6) sentence 2 of the German Corporation Tax Act as part of the tax exemption rules for dividends from participations in corporations and associations does not apply to savings banks that are organized as legal entity governed by private law.
