Germany: Tax amendments 2015 finalised

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany: Tax amendments 2015 finalised

endres.jpg

Dieter Endres

After a series of political disputes, the Bundesrat gave its approval to a watered down Bill to change various tax rules on the lines of a traditional tax amendment act. While the amendments are not drastic, the Bill covers the following.

Income Tax Act

An attempt to transpose the ECJ Beker and Beker judgment of December 18, 2013 (case C-168/11) into national law. The ECJ held the present method of calculating the maximum foreign tax credit to be unacceptable because it effectively reduces personal allowances in proportion to the tax-free foreign source income. The amendment does not completely achieve its object because of a drafting error. Further legislative action is to be expected.

The employee outing tax-free allowance of €110 per head has been retained, but now includes the venue costs as well as the costs of consumption. The main effect is to complicate the administrative burden on employers.

Foreign Tax Act

The profit correction provision has been amended to remove all foreign/domestic considerations from third-party comparisons. This follows from attempts to deny the validity of an unfavourable third-party comparison because one of the parties to it was a local resident.

VAT

Managing portfolio investments on behalf of customers is henceforth a taxable transaction in Germany when performed for a customer in a non-member state of the EU. This responds to an unsuccessful attempt to claim the contrary before the ECJ.

Other changes

In the same session the Bundesrat gave its approval to provisions for less generous treatment of tax evaders coming forward. The restriction follows from improved methods of detection.

Open issues

Proposals that have not been passed, but which remain on the agenda – for 2015 or later – include:

  • a prohibition of a business expense deduction for an outlay that has been or will be deducted abroad. This is primarily intended to counter hybrid financing schemes;

  • taxation of the capital gains of companies from the sale of portfolio shareholdings. This demand of the Bundesrat reflects that body's view of a capital gain as a direct substitute for a dividend;

  • an extension of the intra-group exemption from the loss forfeiture rules for share transfers between related parties; and

  • the abolition of tax-free share exchanges to the extent of a cash balancing payment.

Dieter Endres (dieter.endres@de.pwc.com)

PwC Frankfurt

Tel +49 69 9585 6232

Website: www.pwc.com

more across site & bottom lb ros

More from across our site

India’s budget changes goods and services tax rules; UK private school VAT challenge fast-tracked
It is understood that the US has vowed to oppose any outcome from talks taking place at the UN
It’s the second year in a row that RSM’s tax business has posted fee income growth above 10%
Recent guidance from the Indian tax authorities should provide confidence for investors, says Sanjay Sanghvi of Khaitan & Co
Grant Wardell-Johnson also suggests there could be solutions to the friction between the US and the OECD when it comes to pillar two
The president had so far avoided announcing tariffs on the US’s neighbours despite previous threats
The firm brought in three managing directors from EY and Deloitte in Europe; in other news, KPMG’s bid to practise law in US was delayed
One expert argues the ERS would be unlikely to improve taxpayers’ experience unless it comes with additional funding to hire more agents and staff
From pillar two and amount B to Apple’s headline EU Commission dispute, Martin Bonner and Yiwen Ping of Kreston Global argue that 2024’s key TP developments will inform 2025
Holland & Knight, Nelson Mullins and McCarter & English made the joint-most tax partner hires in the US last year, according to annual ITR Talent Tracker data
Gift this article