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Tax & Legal

Finance Bill 2019 gets green light from Federal Cabinet


On 31 July, the Federal Cabinet adopted a draft Finance Bill 2019 referred to as the “Act on the Further Tax Promotion of Electric Mobility and on the Amendment of Further Tax Regulations”. As its name suggests the bill focuses on tax incentives for electro-mobility but includes legislation in numerous other areas of tax law. Continue reading

Restrictions to the “tainting effect” of trading partnership income for trade tax purposes


For income tax purposes, income of a partnership from leasing and letting or from capital assets is to be reclassified as trading income where the partnership also receives a negligible amount of income from a participation in a trading partnership; however, such “tainted” income is not subject to trade tax. This was decided by the Supreme Tax Court in its ruling of 6 June 2019, published on 1 August 2019. Continue reading

European Court of Justice: Final Losses


The European Court of Justice held in its decision Memira Holding AB issued on 19 June 2019 that when assessing whether the losses of a non-resident subsidiary are final within the meaning of its judgment in Marks & Spencer on 13 December 2005 (C446/03), the fact that, in the event of a merger, the subsidiarys Member State of establishment does not does not allow the losses of one company to be transferred to another company liable for corporation tax, is not decisive, unless the parent company can demonstrate that it is impossible for it to deduct those losses through ensuring that – in particular by means of a sale- the losses are fiscally taken into account by a third party for future tax periods. Continue reading

Locker can constitute a fixed place of business for double tax treaty purposes


The Supreme Tax Court refused to overturn the tax court’s decision to refuse leave to appeal, agreeing with the lower court that a locker can constitute a fixed place of business within the meaning of Article XI Paragraph 1 of the German/British double tax treaty. Continue reading

Tax & Legal News – Issue 3, June 2019


Issue 3 of our Newsletter for 2019, including news about the Research & Development Subsidy Bill, the Finance Bill 2019 and the Supreme Tax Court decision in relation to the impact of Article 9 (1) of the OECD Model Tax Convention on transfer pricing income adjustments. Continue reading

R&D Subsidy Bill


The government draft bill, published on 22 May 2019, provides for the introduction of a subsidy for research and development (R&D). The subsidy – up to a maximum amount of €500,000 – should be available to all taxpaying businesses regardless size, profitability or purpose. The aim is to make Germany more attractive for investment generally and in particular for start-ups. The promotion of small and medium-sized enterprises is a particular focus but the desire remains to promote larger enterprises also. The planned law is to be re-evaluated five years after its entry into force to examine whether its aims, in particular its contribution to the promotion of Germany as a centre of innovation, are met. Continue reading

German Finance Minister talks “minimum taxation”


According to various statements of the German Finance Minister Olaf Scholz on 22 May 2019, a system of international minimum taxation will be discussed at the forthcoming G20 (June 2019) and G7 (August 2019) meetings. The aim is to agree such a system (within the terms of the Global Anti-Base Erosion “GloBE” agenda and given the name “BEPS 2.0”) with the other 128 states of the OECD in the Summer of 2020. Continue reading

State of Lower Saxony Tax Authorities issue directive announcing deviation from the rule of discounting certain liabilities during low- /negative- interest phases for banks


According to Section 6(1) no. 3 Income Tax Act, non-interest-bearing liabilities with terms of at least 12 months, which do not constitute a deposit or advance payment, are to be discounted, i.e. a fictitious interest component (interest rate 5.5%) is initially deducted from profits and added back to profits in subsequent years as notional interest over the term of the loan.
The directive states that, for certain liabilities of banks, no discounting within the meaning of Section 6(1) no. 3 Income Tax Act should occur.
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Ministry of Finance release new form for reporting foreign relationships


The Ministry of Finance has published a new form for reporting foreign relationships according to Section 138 (2) of the General Tax Code (GTC). The new form replaces the form originally included in the Ministry of Finance’s guidelines on the application of Section 138 (2) and Section 138b of the GTC dated 5 February 2018. Continue reading