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Tax & Legal

Swedish interest deduction rule incompatible with EU law


In a recent judgement the European Court of Justice (ECJ) has clarified that it is contrary to the freedom of establishment to deny the deduction of interest costs on a loan from a normally taxed group company, if this would not have happened had the loan been granted from a normally taxed Swedish group company instead. Continue reading

Issue of shares as part of corporate action (spin-off)


The Lower Tax Court of Lower Saxony ruled that the allocation of shares in the course of a restructuring of Hewlett-Packard Company meets the requirements of a spin-off within the meaning of Sec. 20 (4a) Sentence 7 of the German Income Tax Act. Thus, there is no taxable distribution in kind at the time of the share allotment. Continue reading

Tax & Legal Newsflash – German draft bill on the modernization of the withholding tax relief procedure


On January 20, 2021, the German Government adopted the draft bill on the modernization of the relief from withholding taxes and the certification of withholding tax paid (“Abzugsteuerentlastungsmodernisierungsgesetz; AbzStEntModG). The draft bill includes changes to the withholding tax and relief procedure and an adjustment of the German anti-treaty-shopping rules. However, the envisaged retroactive abolishment of the German sourcing rules for licenses and IP sales transactions based on the mere registration of underlying rights in a German register was dropped. The approval of the bill by the German Government is the first step of the legislative process so further changes of the draft bill may occur and need to be monitored. Continue reading

Italy reshapes format, contents and requirements for transfer pricing documentation


In brief

The Italian Revenue Agency on November 23 issued the long-awaited Act of the Director of the Revenue Agency no. 360494 (New Act). The New Act introduces significant and substantial changes to the rules related to the ‘appropriate’ Transfer Pricing documentation that must be prepared in order to support the application of the arm’s-length principle to intercompany transactions, and hence establishes the new requirements for opting-in the Italian penalty protection regime. Continue reading

Review of profit and loss pooling agreements concluded prior to 27 February 2013 recommended


An amendment to a statutory law which was passed by the Bundestag and Bundesrat in December 2020, entered into force on 1 January 2021, requires a review of those profit and loss pooling agreements concluded and last amended before 27 February 2013. This pertains to profit and loss pooling agreements (PLPA) for tax groups (“Organschaft”) with a GmbH as controlled subsidiary and which do not (yet) contain an explicit and unconditional reference to Section 302 of the German Stock Corporation Act (GSCA) which includes future changes of the provision (so-called “dynamic reference”).
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