Tax Law in Germany
Zusammenfassung
This book gives a compact overview of German tax law and explains its key features, focusing in particular on the tax consequences for foreign investors when investing in Germany as well as the international aspects of German tax law.
Introducing the reader to the German tax law, it continues to give an overview of the German tax system and goes on to cover topics, such as: taxation of individuals and companies; tax treaties; CFC regulations; investments through German corporations and partnerships; taxation of direct transactions; double taxation agreements; area-specific tax law; further issues such as employee secondments, financing, etc.
In addition to a general update, the third edition takes into account the reform projects initiated as a result of the OECD BEPS project, especially the innovations in the area of supplementary taxation, transfer pricing and taxation of permanent establishments. The authors share their practical experiences and examples from daily work to guide foreign investors, tax advisors, academics and anyone interested in tax law through the German tax jungle.
Schlagworte
- II–XXVI Titelei/Inhaltsverzeichnis II–XXVI
- 1–17 Chapter 1 Introduction 1–17
- 1–2 A. Purpose of this book 1–2
- 2–2 B. Benefits for readers 2–2
- 2–8 C. Peculiarities of German tax law 2–8
- I. High degree of codification
- II. Tax Court system and ‘tax climate’ in Germany
- III. EU law and its influence
- IV. German Federal Constitutional Court
- V. Tax treaties and treaty overrides
- VI. Trade tax
- 8–12 D. Good to know – useful information and recommendations for foreign investors 8–12
- I. Ruling practice/APA practice
- II. VAT for foreign entrepreneurs – practical issues
- 1. General information
- 2. Contact details
- 3. Application process
- 4. Tax representative
- 12–13 III. Cooperation duties in international tax cases 12–13
- 13–14 IV. Transfer pricing documentation requirements 13–14
- 14–14 V. Disclosure duties for international payments 14–14
- 14–15 VI. Estimation of taxable income 14–15
- 15–15 VII. Voluntary disclosure procedure 15–15
- 15–17 VIII. General rules for keeping books and records 15–17
- 17–45 Chapter 2 Overview of the German Tax System 17–45
- 17–18 A. Tax subjects – tax liability 17–18
- 18–20 B. Taxpayer 18–20
- 20–22 C. Taxable income 20–22
- I. Depreciation
- II. Thin capitalisation rules
- 22–22 D. Corporate income tax 22–22
- I. Corporate income tax for corporations
- II. Income tax for partnerships
- 22–23 E. Trade tax 22–23
- 23–24 F. Financial statements, accounting, and reporting 23–24
- 24–24 G. Electronic tax balance sheet 24–24
- 24–25 H. Group taxation 24–25
- 25–25 I. Tax losses 25–25
- 25–28 J. Value-added tax 25–28
- 28–28 K. Real estate tax 28–28
- 28–30 L. Real estate transfer tax 28–30
- I. Indirect transfer of real estate property
- II. Tax exempt transfers
- 30–31 M. Customs and excise duties when importing goods to Germany 30–31
- 31–32 N. Tax incentives for organisation of general interest – charitable organisations 31–32
- 32–37 O. EU law 32–37
- I. Indirect tax directives
- II. Merger Directive
- 1. The substantive scope of the Reorganisation Tax Act with respect to the Merger Directive
- 2. The personal scope of the Reorganisation Tax Act
- III. Parent-Subsidiary Directive
- 1. The personal scope of the Parent-Subsidiary Directive implemented in German tax law
- 2. The substantive scope of the Parent-Subsidiary Directive implemented in German tax law
- IV. Interest and Royalties Directive
- 1. The personal scope of the Interest and Royalties Directive as implemented in German tax law
- 2. The substantive scope of the Interest and Royalties Directive as implemented in German tax law
- 37–38 P. Tax treaties 37–38
- I. General
- II. Subject to tax clauses
- 38–38 Q. Anti-treaty/directive-shopping rule 38–38
- 38–40 R. CFC regulations 38–40
- 40–41 S. Assessment procedure 40–41
- 41–41 T. Filing and payment 41–41
- 41–42 U. Objection to tax assessment 41–42
- 42–42 V. Statute of limitations 42–42
- 42–42 W. German tax authorities 42–42
- 42–44 X. Tax audits 42–44
- 44–45 Y. Rulings 44–45
- 45–63 Chapter 3 Investment Through German Corporations 45–63
- 45–46 A. Establishment of a corporation 45–46
- 46–48 B. Forms of corporations 46–48
- I. Stock corporation
- II. Limited liability company
- III. Societas Europaea
- IV. Commercial Register
- 48–50 C. Taxation of corporations 48–50
- 50–50 D. Taxation of the shareholder 50–50
- 50–53 E. Thin capitalisation rules 50–53
- I. Escape clauses
- II. Exemption from escape clauses
- III. Definitions
- IV. Interest expense carry-forward
- V. EBITDA carry-forward
- 53–53 F. Dividend taxation 53–53
- 53–54 G. Capital gains 53–54
- 54–54 H. Held for trading shares 54–54
- 54–57 I. Change in ownership rule 54–57
- I. General
- II. Change-in-ownership rule since 1 January 2008
- III. Exceptions
- 57–58 J. Trade taxable income 57–58
- I. Add-backs
- II. Deductions
- 58–61 K. Tax group 58–61
- I. General
- II. Legal conditions
- III. Advantages
- IV. Risks
- V. Consolidated return – tax group
- VI. Future of German fiscal unity rules
- 61–62 L. Tax assessment period 61–62
- 62–63 M. Electronic tax declaration 62–63
- 63–99 Chapter 4 Investments Through German Partnerships 63–99
- 63–64 A. Overview 63–64
- 64–65 B. Available classes of partnerships 64–65
- I. Legal classification
- 1. General
- 2. Short explanations
- II. Tax law classification
- 65–78 C. General taxation principles 65–78
- I. Different classes of partnership in German tax law
- 1. Commercial partnerships
- 2. Deemed-commercial partnerships
- 3. Non-commercial partnerships
- II. Relationship between partners and ‘their’ partnership
- 1. Special remuneration
- 2. Special business assets
- III. Special issues
- 1. Transfer of assets between partnerships and partners
- 2. Sale of partnership interest and winding-up
- 3. Fictitious ‘split of business’
- 4. Option to corporate taxation
- IV. Tax rates/earnings retention
- 78–79 D. Procedural aspects of income determination 78–79
- I. General
- II. Restrictions due to § 15a EStG regarding losses
- III. Uniform determination of profits
- 79–85 E. Application of tax treaties 79–85
- I. Commercial partnerships
- 1. General
- 2. Special remuneration
- II. Deemed-commercial partnerships
- III. Non-commercial partnership
- IV. Inbound-investment through foreign partnerships
- 85–99 F. Inbound tax planning with partnerships – examples 85–99
- I. Using partnerships to avoid the German interest barrier rule
- 1. Structure chart
- 2. Explanation
- II. Outbound investments with partnerships
- 1. Structure chart
- 2. Explanation
- III. Simplification of structures with partnerships
- 1. Structure chart
- 2. Explanation
- IV. Step-up planning with partnerships
- 1. Structure chart
- 2. Explanation
- V. Avoiding RETT with partnerships
- 1. Structure chart
- 2. Explanations
- VI. Tax planning with non-EU/non-treaty countries
- 1. Structure chart
- 2. Explanation
- VII. Creation of divisions for reorganisation purposes
- 1. Structure chart
- 2. Explanation
- VIII. Immediate loss utilisation through partnerships
- 1. Structure chart
- 2. Explanation
- 99–124 Chapter 5 Investments Through German Permanent Establishments 99–124
- 99–105 A. General 99–105
- I. Introduction
- 1. Legal perspective
- 2. Allocation of taxation rights between states
- II. What constitutes a permanent establishment?
- 1. National tax law vs OECD Model Tax Convention
- 2. § 12 AO
- III. Permanent representative
- 105–105 B. Taxation rules 105–105
- 105–116 C. Profit allocation 105–116
- I. Basic problems
- II. Profit determination: eligible methods
- 1. Direct method
- 2. Indirect method
- III. Allocation of assets and profits and other problems
- 1. Attribution of assets
- 2. Attribution of business expenditures and business income
- 3. Funding of the permanent establishment
- 4. Transfer of assets
- 5. Currency exchange rate problems
- 6. Bookkeeping of the permanent establishment
- 116–124 D. Inbound tax planning with permanent establishments – examples 116–124
- I. Avoiding the interest barrier rule with a permanent establishment
- 1. Structure chart
- 2. Explanation
- II. Simplification of permanent establishment structure
- 1. Structure chart
- 2. Explanation
- III. Loss utilisation with permanent establishment structure
- 1. Structure chart
- 2. Explanation
- IV. Tax credit permanent establishment structure for foreign investors
- 1. Structure chart
- 2. Explanation
- 124–137 Chapter 6 Taxation of Direct Business Activities 124–137
- 124–124 A. Introduction 124–124
- B. Limited tax liability
- I. ‘General tax assessment procedure-income’
- II. ‘WHT-income’
- 1. Dividends
- 2. Interest income
- 3. Salaries
- 4. Construction works
- 5. Artists, athletes and journalists
- 6. Exploitation of intellectual property rights
- III. Special refund procedure for WHT
- 1. Dividends
- 2. Income under § 50a(1) no. 1 EStG
- 137–171 Chapter 7 Special Tax Problems of Cross-Border Investments 137–171
- 137–138 A. VAT refund problems 137–138
- 138–140 B. German trade tax system 138–140
- I. Calculation of trade tax
- II. Taxable income
- 1. Add-backs
- 2. Deductions
- 140–142 C. Thin capitalisation rules 140–142
- I. Exemption from escape clauses
- II. Definitions
- III. Interest expense carry-forward
- IV. EBITDA carry-forward
- 142–143 D. Cross-border aspects of German tax groups 142–143
- 143–144 E. Dual consolidated loss rules 143–144
- 144–144 F. Bookkeeping abroad 144–144
- 144–149 G. Taxation of cross-border dividends 144–149
- I. General
- II. Portfolio dividends
- III. Hidden profit distributions
- IV. Hidden equity contribution
- 149–153 H. Taxation of royalty payments 149–153
- I. Anti-abuse regulations
- I. Background
- II. New provision: § 50d(3) EStG
- III. Personal scope of application
- IV. Substantive scope of application
- V. Possibility of counter-evidence
- VI. Miscellaneous
- 153–171 J. Hybrid entities 153–171
- I. Dividends
- 1. The personal scope of the Parent-Subsidiary Directive implemented in German tax law
- 2. The substantive scope of the Parent-Subsidiary Directive implemented in German tax law
- 3. Implementation of Art. 4(1)(a) Parent-Subsidiary Directive
- 4. Application of § 43b EStG with respect to hybrid entities
- II. Royalty payments
- 1. The personal scope of the Interest and Royalties Directive as implemented in German tax law
- 2. The substantive scope of the Interest and Royalties Directive as implemented in German tax law
- 3. Application of § 50g EStG with respect to hybrid entities
- III. Reorganisations
- 1. The substantive scope of the Reorganisation Tax Act with respect to the Merger Directive
- 2. The personal scope of the Reorganisation Tax Act
- 3. Implementation of Art. 4(2) Merger Directive
- 4. Implementation of Art. 8(3) Merger Directive
- 5. Implementation ofArt. 10a Merger Directive 2005/19/EC
- IV. Implementation of the OECD approach to hybrid entities in German legislation and tax treaties
- 1. Issues arising from the application of different treaty articles to income earned by a hybrid entity
- 2. Special remunerations
- V. Most recent changes from 2021 onwards
- 171–203 Chapter 8 Tax Problems of Special Industries/Business Sectors 171–203
- 171–173 A. Investment funds 171–173
- I. Closed-end funds (KG structures)
- II. Open-ended funds
- 1. Mutual Funds
- 2. Special funds
- 173–183 B. Real estate sector 173–183
- I. VAT
- II. Real estate transfer tax
- 1. RETT-blocker structure for acquisition of shares
- 2. Structure for acquisition of partnership interest
- 3. Intra-group reorganisations
- 4. Hive-down restructuring using a RETT-blocker KG
- 5. Tax efficient interposition of GmbH
- 183–187 C. Shipping industry 183–187
- I. German tonnage tax system
- II. Art. 8 OECD MTC and the German approach
- 1. General
- 2. Reflection of Art. 8 in German tax treaties
- 3. Major problems in practice
- 187–190 D. Distribution models: principal structures 187–190
- 190–193 E. M&A/Private Equity – cross-border reorganisations 190–193
- 193–195 F. Non-profit organisations 193–195
- I. General
- II. Tax-privileged purposes
- 1. Public-benefit purposes
- 2. Charitable purposes
- 3. Religious purposes
- III. General requirements for tax privilege
- 195–198 G. E-commerce 195–198
- I. Difficulties with taxing e-commerce
- II. Main problems of direct taxation
- III. Value-added tax
- 198–203 H. Leasing 198–203
- I. General advantages of leasing
- II. Tax balance sheet issues
- III. Relevant category of income
- 203–230 Chapter 9 Holding Companies in Germany 203–230
- 203–204 A. General 203–204
- 204–204 B. Acquisition 204–204
- 204–205 C. Financing 204–205
- 205–206 D. Comparison of corporation and partnership as holding company 205–206
- 206–207 E. VAT – entrepreneur status 206–207
- 207–208 F. Limited tax liability 207–208
- 208–209 G. Taxation of partnerships 208–209
- 209–212 H. Participation exemption for corporations 209–212
- I. Dividend income
- II. Capital gains
- III. Held-for-trading shares
- IV. Withholding taxes
- 212–214 I. Exit taxation 212–214
- I. General
- II. Exception and EU law
- 214–223 J. Reorganisation 214–223
- I. General principles
- II. Qualifying assets
- III. Types of reorganisation
- IV. Conversion from corporation to partnership
- V. Merger of a corporation into a German partnership
- VI. Merger of corporations
- VII. Demerger of corporations
- VIII. Hive-down into corporations
- IX. Share-for-share exchanges
- X. Conversion of partnership into corporation
- XI. Hive-down of single assets into partnership
- 223–230 K. CFC regulations 223–230
- I. Low taxation
- II. De minimis threshold
- III. Lower tier intermediary companies
- IV. Escape rule for EU companies
- V. Income amount computation
- VI. Tax credit
- VII. Capital gains
- 230–252 Chapter 10 Transfer Pricing from a German Perspective 230–252
- 230–231 A. Introduction 230–231
- 231–234 B. General provisions governing profit allocation between related parties 231–234
- I. National German tax law
- 1. Profit allocation under double taxation agreements
- 2. Hidden profit distribution and hidden capital contribution
- 3. § 1 AStG
- II. Business relations to affiliated persons
- 234–246 C. General principles for the allocation of income 234–246
- I. The arm’s length test
- II. Standard transfer pricing methods
- 1. Comparable uncontrolled price method
- 2. Resale price method
- 3. Cost plus method
- 4. General: set-off of benefits
- 5. Application of the methods
- III. Goods and services
- 1. Supply of goods and services
- 2. Commercial services
- 3. Advertising costs
- 4. Market penetration costs
- 5. Start-up costs
- IV. Interest and similar remuneration
- 1. General
- 2. Relevant interest rates
- 3. Guarantees and similar obligations
- 4. Transfer of intangible assets
- 5. Administrative services within the group
- 6. New judgments on inter-company financing
- 246–252 D. Business restructurings: relocation of functions 246–252
- I. Introduction
- II. OECD Transfer Pricing Guidelines
- III. German approach to business restructurings
- 1. General
- 2. Special aspects of specific relocations of functions
