On March 24, 2021, the federal government passed a draft law to implement the Anti-Tax Avoidance Directive (ATAD Implementation Act or ATADUmsG).

The draft law also provides for the significant tightening of exit taxation, which has been discussed for a long time. In addition, the federal government is sticking to the low tax rate of 25 % on the grounds that the work at the OECD level on the introduction of a global minimum taxation (BLOBE) has not yet been completed.

In particular, the draft law contains the following measures:

  • Adjustment of the deferral regulation for exit taxation
  • Changes for additional taxation (shareholder-related consideration)
  • Linkage of values in tax entanglement

With regard to the exit taxation of natural persons according to Section 6 of the Foreign Tax Act (AStG), the draft law provides for standardization of the deferral regulations and changes to the so-called returnees regulation.

The control criterion in particular is adjusted through adjustments to the additional taxation. Instead of focusing on national control, a shareholder-related consideration of the control criterion will be carried out in the future. In addition, in the case of multi-level company structures, there is no longer any loss consolidation at the level of the highest foreign company within the framework of additional taxation.

In particular, the changes relating to exit taxation and add-back taxation should only apply from January 1, 2022. You can still trade with it now.

Please contact us as your experts for international corporate tax law. Please find further information to International taxation here on our website. In case of any questions to corporate tax law please do not hesitate to contact us.

Christian Dobner | TLI Steuerberater

On March 31, 2021, the German Federal Cabinet passed the Tax Haven Defense Act. The aim of the German federal government is to ensure more tax justice across national borders.

The Tax Haven Defense Act aims to encourage non-cooperative states and tax havens to implement international tax standards and prevent tax avoidance through defensive measures. Individuals among companies should be prevented from continuing or starting new business relationships in these tax havens.

The draft contains the following defensive measures, among others:

  • Prohibition of deducting business expenses and business expenses
  • Stricter additional taxation
  • Stricter withholding tax measures
  • Measures in the event of profit distributions and the sale of shares

With the prohibition of the deduction of business expenses and business expenses, expenses from business transactions with reference to tax havens can no longer be claimed for tax purposes in the future.

If a so-called intermediate company is located in a tax haven, stricter additional taxation should apply in the future. According to the draft of the Tax Haven Defense Act, all active and passive income of the intermediate company should be subject to additional taxation.
Stricter withholding tax measures are to be applied if, for example, interest expenses are paid to people living in tax havens. Such financing fees are to be subject to withholding tax in the future.

In the case of profit distributions and the sale of shares, tax exemptions and provisions in the double taxation agreement (DTA) are to be restricted or refused if these payments are made by a corporation resident in a tax haven or shares in a company resident in a tax haven are sold.

Please contact us as your experts for international corporate tax law. Please find further information on our website for International taxation. In case of any questions to corporate tax law please do not hesitate to contact us.

Christian Dobner | TLI Steuerberater

The exit of Great Britain and Northern Ireland (UK) from the European Union (EU) will have very significant VAT consequences at the end of the so-called transition period of December 31, 2020.

The United Kingdom has qualified as a third country for Value Added Tax (VAT) purposes since January 1, 2021. This does not apply to Northern Ireland for the supply of goods due to its special status. Numerous EU directives in the field of VAT continue to apply to Northern Ireland. In future, a strict distinction must be made between Great Britain and Northern Ireland in the supply of goods. Northern Ireland is still considered a so-called community area for VAT purposes. However, caution is required when providing services. Northern Ireland is also considered as a third country here.

The treatment of supplies made before January 1, 2021, in which the item supplied has reached the UK or domestic from there after December 31, 2020, is questionable. The treatment of other services (long-term services), the provision of which begins before January 1, 2021 and ends after December 31, 2020, must also be examined. Shortly before the end of the so-called transition period of December 31, 2020, the Federal Ministry of Finance expressed itself for the first time in an administrative instruction.
Changes will also result from January 1, 2021 for the application of the so-called Mini-One-Stop-Shop and for the so-called input VAT refund procedure.

Finally, after December 31, 2020, it will no longer be possible to check VAT identification numbers for companies based in the United Kingdom in the so-called confirmation procedure according to Section 18e of the Value Added Tax Act (UStG).
In the first few weeks of the new year, it turned out to be particularly relevant in practice that companies based in Great Britain need an authorized recipient in Germany in accordance with Section 22f (1) sentence 4 UStG.

How things will actually continue in practice in so-called administrative assistance procedures remains open at the moment, even if the German tax authorities refer to the continued applicability of various European agreements.
Please contact us as your VAT experts. Please find further information to corporate tax law here on our website. In case of any questions to corporate tax law please do not hesitate to contact us.

Christian Dobner | TLI Steuerberater

At the turn of the year 2021, the tax authorities once again tightened the notification requirements for international relationships with immediate effect. The indirect acquisitions of foreign holdings are particularly affected by the new regulation.

Taxpayers with their place of residence, habitual residence, management or head office in the area of application of this law (domestic taxpayers) have the tax office responsible for them in accordance with Section 138 (2) No. 3 of the Tax Code (AO) to acquire or sell interests in a corporation, To notify an association of persons or assets with their registered office and management outside the scope of this Act if this results in a participation of at least 10 percent in the capital or assets of the corporation, association of persons or assets or if the total cost of all investments is more than 150,000 euros. This does not apply to the acquisition and sale of investments of less than 1 percent in the capital.

This notification obligation according to § 138 paragraph 2 sentence 1 number 3 AO only exists if the relevant participation limits are reached or exceeded when acquiring a participation (for the first time or again after falling below the limit in the meantime).

The notification obligation also includes the acquisition of indirect holdings. If the prerequisites are met, the obligation to notify exists only for participations that the domestic taxpayer has acquired for or free of charge. In the event of the acquisition of a direct stake in a corporation, association of persons or assets, the domestic taxpayer must also report the indirect stakes acquired at the same time, provided the other requirements for this are met.

The sale of a participation is notifiable according to §138 paragraph 2 sentence 1 number 3 AO if the acquisition costs of all participations sold exceed 150,000 euros or at least a 10 percent participation is sold. If these prerequisites are met, the obligation to notify exists only for the direct holdings that the taxpayer himself has sold and, as a result, indirect holdings that are also sold at the same time.

Wheter or not there is a notification obligation must therefore be reviewed carefully in each individual case. Please contact us as your experts for international tax law. Please find further information to international tax law here on our website. In case of any questions to corporate tax law please do not hesitate to contact us.

Christian Dobner | TLI Steuerberater

The dispute over the deductibility of input VAT for a functional holding is entering the next round. The issues in dispute must now be clarified by the European Court of Justice (ECJ).

A pure financial holding whose sole purpose is to acquire and hold company shares is not an entrepreneur from a VAT point of view and is therefore not entitled to deduct input VAT.

The situation is different, however, with a so-called functional holding company, which intervenes directly or indirectly in the management of its corporate participation. A functional holding company regularly provides administrative or commercial services. In this case, the holding company qualifies as an entrepreneur under VAT law and is generally entitled to deduct input VAT from the services it has purchased.

Unlike the rest of corporate tax law or international tax law, VAT is a type of tax that practically requires no creativity from tax advisors. In the case of the input VAT deduction for holding companies, however, a structure was also possible in exceptional cases for VAT. By cleverly interposing a functional holding company, the VAT deduction, which a pure financial holding company is denied, could be obtained.
In a dispute, the Federal Fiscal Court (BFH) now had to decide on the input tax deduction of a management holding company. In a so-called request for a preliminary ruling, the Federal Finance Court submitted two questions to the ECJ on February 15, 2021, according to the ECJ’s notification of March 3, 2021.

First of all, the BFH asks whether the functional holding company is also entitled to an input VAT deduction from purchased services if these purchased services are not directly and directly related to the holding company’s own sales but to the activities of the subsidiary. If the ECJ affirms the input tax deduction for the functional holding company in this case, the BFH asks the second question whether the interposition of the functional holding company is to be viewed as an abuse of law, since the subsidiary would not be entitled to input tax deduction even if the service was directly supplied.

Due to the high practical relevance, the decision of the ECJ is eagerly awaited. Should the ECJ decide that the functional holding company is not entitled to deduct input VAT in such cases, this would be a heavy blow to Germany as a holding location.

Please contact us as your experts for corporate tax law in case of any questions to this VAT issue. Please find further information to VAT here on our website. In case of any questions to corporate tax law please do not hesitate to contact  us.

Christian Dobner | TLI Steuerberater

In the age of the digitization and global interlinking nearly every enterprise becomes conscious or unconsciously with the international tax right confronted.

Experience and routine is necessary beside a maximum in sound legal knowledge in the national law as well as in the legal system of the foreign state for the solution of international tax circumstances. TLI Steuerberater is specified on the solution of the most complicated international of tax circumstances. The tax advisers TLI distinguish themselves by the additional qualification „specialized advisor for international tax law“ which can be attained only by filing an additional one by the state supervised check as well as the proof about the treatment of a variety of practical cases in the international tax law.

Trust with the consultation in the area of the international tax law, e.g., with the acquisition of participation or real estate abroad, with foreign company sites, with the regulation of settlement prices or by delegation of employees abroad in the professional advisers for international tax right of the TLI Steuerberatungsgesellschaft Dobner GmbH & Co. KG.

The tax advisers of TLI are always informed about changes in the foreign tax legal systems and also detain you with short land reports.

a. Italy: Introduction of a web tax

By the 1 January 2020 Italy has introduced so-called “Web Tax”. This web Tax corresponds to the French model which intends a taxation of 3 % on home ones digitally achieved turnovers. The new web Tax should be valid as long as, up to international level a uniform arrangement for the taxation of digital turnovers is made.

Not every enterprise with turnovers digitally achieved in Italy is concerned by the new web tax. However, foreign companies that do not have a permanent establishment in Italy may also be subject to the new tax. If the conditions for taxation are met, the foreign company must register or appoint a fiscal representative in Italy.

Taxable are digital services such as the transmission of data generated by using a digital platform, the provision of multilateral digital platforms and the placement of advertising on a digital platform.

In particular, physical deliveries of goods within the framework of digital mediation are excluded from the Italian web Ttx.

The place of supply of the service is relevant for the application of the new web tax. However, the criteria for determining the place of performance of the service are likely to be subject to dispute.

The experts and specialist advisors for international tax law at TLI Steuerberater are at your disposal with their wealth of experience in international taxation. TLI tax consulant advises on the domestic activities of foreign companies, the foreign activities of German companies, and the immigration and emigration of natural persons.

b. India: News from company taxation

In order to stimulate economic growth in India, the government has decided to significantly reduce the corporate tax burden. In addition, there will be further tax relief for companies.

The standard tax rate for companies in India has so far been 30 %. The new regulation reduces the tax rate to 22 %. Under certain conditions, the tax rate can be reduced to 15 % for start-ups.

This new regulation could also provide a huge incentive for foreign companies to invest. However, a reduction in the tax rate must always be seen in the international tax context and in compliance with the double taxation agreements.

Like the United States of America, India also has a minimum tax, the so-called “alternative minimum tax”. The tax rate for this minimum tax has also been reduced. Additional levies have also been reduced.

TLI tax advisors‘ experts and expert advisors on international tax law will assist you with their wealth of experience in international taxation. TLI Steuerberater advises on domestic activities of foreign companies, foreign activities of German companies, as well as on the immigration and departure of natural persons.

c. Spain: Notification obligations for foreign relations

With effect from 1 January 2018, Germany had tightened its national rules on the reporting obligation for foreign matters. Particularly affected was the obligation to notify so-called third-country issues. The background to this intensification was the public discussion about the so-called Panama Papers, which uncovered a number of so-called letterbox companies in tax havens.

The Spanish Government has recently followed suit and has also tightened its national rules on the obligation to notify foreign affairs. In particular, the creation of companies, the exercise of functions of management, a shareholder or a trustee as well as special services will be subject to notification in the future.

The Spanish treasury imposes heavy fines for not reporting these facts.

TLI tax advisors and expert advisors on international tax law will assist you with their wealth of experience in international taxation. TLI Steuerberater advises on domestic activities of foreign companies, foreign activities of German companies, as well as on the immigration and departure of natural persons.

If you have any questions about national or international tax issues, please contact us directly at any time.

Christian Dobner | TLI Steuerberater