The tax authorities have now published the final Ministry of Finance circular answering questions in connection with the application of the exchange of financial information and the FACTA agreement. The draft versions of the circular had previously been released and these are now in a final version.
In the fight against cross-border tax evasion and other practices showing a lack of discipline for tax purposes, the OECD has developed a standard for the automatic exchange of information on financial accounts (CRS – Common Reporting Standard). On 29 October 2014 Germany committed itself – in conjunction with numerous other countries – to implement a system for exchange. The CRS obliges financial institutes to report to the German tax authorities information on financial assets, which are managed in participating countries on behalf of taxpayers. This information is exchanged between the tax authorities of participating states.
The conclusion of the so-called FACTA agreement between the USA and Germany on 31 May 2013 also introduced rules on the automatic exchange of tax relevant data from financial institutes. This was also intended to induce more honesty in tax matters cross-border.
The Ministry of Finance has now produced a 96 page document to clarify the various issues.
Ministry of Finance circular of 1 February 2017 (IV B 6 – S 1315/13/10021:044), published on the Ministry’s home page on 3 March 2017
The federal government and federal states have agreed unanimously upon the criteria for a revision of the tax treatment of existing cum/cum structures. The tax authorities of the federal states could then – according to comprehensive and standardised criteria – attack cum/cum transactions, which were executed before the change in the law as at 31 December 2015.
The agreement was reached when the heads of the tax departments of the respective federal and states Ministries of Finance met in Berlin between 1 and 3 March 2017. A new Ministry of Finance circular will be prepared to implement the decision. The existing Ministry of Finance circular of 11 November 2016 will continue to apply to the beneficial attribution of securities transactions.
On 22 February 2017 the federal government approved a draft bill to implement both the fourth EU money laundering directive and the EU regulation on the transfer of funds as well as to reorganise the Central Financial Transactions Investigation Agency. The intention is to up-date and strengthen measures developed to prevent money laundering and the financing of terrorism.
The Central Financial Transactions Investigation Agency (“Zentralstelle für Finanztransaktionsuntersuchungen” – “FIU”) will be restructured and will obtain more staff
Previously the FIU was known as the Central Authority for Suspect Reporting (“Zentralamt für Verdachtsmeldungen”) at the Federal Police Department within the Ministry of the Interior. It will now be transferred to the General Customs Directorate, i.e. within the Ministry of Finance. Furthermore its responsibilities and competencies will be revised according to the provisions of the fourth EU directive on money laundering. One area of focus will lie in operative and strategic analysis.
In addition the FIU should, for the first time, have a filter function, the aim of which is to reduce the burden on the prosecution authorities. In future only credible suspicions should be passed on to the prosecutor.
Draft bill lays the foundations for a central electronic transparency register
This is intended to disclose information on the beneficial owners of an enterprise. The aim being more transparency and thus to hinder the abusive use of companies and trusts for the purpose of money laundering and offences underlying it, such as tax evasion and the financing of terrorism. The bureaucracy for businesses should however be kept at a minimum by the utilising information on any interests held already available in existing registers, such as the commercial register.
Penalty levels to be significantly increased
Penalties for serious, repeated and systematic offending are to be significantly increased to secure compliance with the money laundering regulations. Furthermore, in future the authorities will publish all penalty notices, which can no longer be disputed, on their website.
In its last session of the year, the Federal Assembly (Bundesrat) gave its assent today to the Act to Implement the Amendments to the EU Mutual Assistance Directive and to Introduce Further Measures to Combat Profit Reduction and Profit Shifting
This packet of measures, which will come into effect on 1 January 2017, will give almost € 25 billion worth of relief to taxpayers. In particular low earners, families and lone parents will benefit.
The Bundesrat also gave its assent to the law amending the rules regarding the utilisation of losses upon change of control. (See our Blog: https://blogs.pwc.de/german-tax-and-legal-news/2016/12/06/bundesrat-set-to-approve-draft-for-relief-from-curtailment-of-loss-utilization)