Tax Haven Defense Act decided
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
