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Tax & Legal

Exemption of loss forfeiture for troubled businesses not illicit state aid


The ECJ overturned an earlier judgment of the European General Court and held that the German tax legislation concerning the possibility of a loss-carry forward to future tax years despite a harmful share acquisition in cases of a rescue plan to save the company from insolvency – known as the salvage clause – is not illegitimate state. Continue reading

Current version of German anti-treaty shopping legislation is also incompatible with EU law


On 25 June 2018, the European Court of Justice published its decision of 14 June 2018 concerning the current version of the German anti-treaty /anti-directive shopping legislation. Again, the ECJ found that the provision both contravened the Parent/Subsidiary Directive and constituted a restriction of the freedom of establishment. Continue reading

Input VAT deduction available despite missing details on the date of supply


For the purposes of input VAT deduction, the necessary information about the tax point (the date of the supply) may be inferred from the date on which an invoice was issued, if it can be assumed that the service was provided in the month in which invoice was issued.  The Supreme Tax Court also confirmed European Court of Justice case law, according to which a retroactive adjustment of the invoice reverts to the year of its issue. Continue reading

German CFC rules may be compatible with EU law


The European Court of Justice held that the German CFC regulations – as such – do not generally pose a restriction on the freedom of establishment. It is up to the referring court, however, to decide whether the legislation did in fact give the taxpayer the chance to prove that the terms were agreed on for commercial reasons resulting from its status as a shareholder of the non-resident company.
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ECJ decision German CFC regulations to be published on 31 May 2018


The publication of the decision of the European Court for Justice (ECJ) in the Hornbach-Baumarkt case is scheduled for 31 May 2018. The case revolves around the question whether Section 1 of the Foreign Transaction Tax Act (“FTTA” – in the version in force in 2003) violates the freedom of establishment. The section in question calls for income corrections to be made on related party transactions which are not considered to have been concluded at arm’s length. Continue reading

ECOFIN-Council formally accepts the changes to the Mutual Assistance Directive in relation to the reporting obligation for cross border arrangements (DAC6)


In its sitting on 25 May 2018, the ECOFIN council formally accepted the Directive to amend the Mutual Assistance Directive 2011/16/EU to provide for the mandatory exchange of information in the area of taxation for reportable cross-border arrangements. ECOFIN had already reached a political agreement on the planned reporting obligation for cross-border tax arrangements at its plenum on 13 March 2018. Continue reading

Federal Finance Ministry circular on the tax treatment of salaries for tax treaty purposes is updated.


The Federal Finance Ministry circular of 12 November 2014 on the taxation of salaries for tax treaty purposes has been revised by a committee made up of from both the Federal and the States’ governments. The new version recognises OECD developments as well as recent case law and relevant changes in the legislation. Continue reading