International exchange of information
In recent years, Germany has been vigorous in promoting the international exchange of tax information and has either agreed to obligations regarding the exchange of information in DTTs or concluded Tax Information Exchange Agreements (TIEAs) with countries with which it has not concluded a general DTT.
The Foreign Account Tax Compliance Act (FATCA) agreement of 31 May 2013 with the United States (US) on the automatic exchange between national tax authorities of bank account information on each other's residents has been in force since December 2013.
Moreover, Germany has signed and implemented into domestic law the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information as of 29 October 2014, which is based on the Convention on Mutual Assistance in Tax Matters (1988/2010), which itself was also signed and implemented into domestic law by Germany. The first exchange of information on financial accounts in tax matters based on the so-called common reporting standard (CRS) from Germany took place in September 2017.
Automatic exchange of information has further been pushed as part of the BEPS Project of the OECD. The Multilateral Competent Authority Agreement on the Automatic Exchange of Country-by-Country Reports as of 27 January 2016 was signed by Germany and implemented into domestic law in 2016. At the level of the EU, the Directive on Administrative Cooperation in the Field of Taxation was extended with respect to the exchange of information regarding CbCR as well as advance cross-border tax rulings and APAs. Both amendments were implemented by Germany into domestic law in December 2016
Furthermore, at the EU level, an extension of the EU Directive on Administrative Cooperation in the Field of Taxation with reference to the exchange of information on cross-border tax planning schemes ('arrangements'), including the imposition of reporting requirements on so-called intermediaries and taxpayers, was adopted in May 2018. The new rules must be implemented into domestic law by 31 December 2019 and will become applicable from 1 July 2020. It should be noted, however, that the reporting rules also cover reportable cross-border arrangements where the first step is implemented between 25 June 2018 and 30 June 2020. While the legislative procedure to implement these rules into local law has not started yet in Germany, a first discussion draft for a bill has been circulated.
BEPS Project of the OECD
On the initiative of the G20 group of countries, the OECD developed a 15-point Action Plan to address BEPS by multinational companies. It aims to adjust local tax regimes and DTTs to keep pace with globalisation and technical developments.
Some jurisdictions and the European Union already started implementing parts of the actions into their local law. Moreover, in August 2016, the EU Anti-Tax Avoidance Directive (EU-ATAD) entered into force, which includes certain minimum standards to combat tax avoidance schemes and which must be primarily implemented into national law by 31 December 2018.
Germany has already transposed some of the measures developed by the OECD or provided for by the European Union into domestic law, in particular concerning the international exchange of information in tax matters. Further, Germany introduced a restriction on the deductibility of royalty payments to related parties in certain cross-border situations where a preferential tax regime is considered harmful, applicable from 2018 onwards.
In addition to the OECD proposals, Germany will also have to consider various standards as set forth by the European Union. The EU-ATAD must be implemented into local law in the main no later than 31 December 2018 and will generally be applied from 1 January 2019 onwards. In May 2017, the Council of the European Union further adopted a directive amending the EU-ATAD (ATAD II). The member states must transpose the ATAD II into local law by 31 December 2019 and apply it generally from 1 January 2020 onwards. However, the legislative procedure to implement these rules into local law has not yet commenced in Germany.
Together with numerous other countries, Germany signed the so-called 'Multilateral Instrument' (MLI) at an official signing ceremony on 7 June 2017. It is expected that Germany will seek to conclude additional bilateral agreements with respect to each DTT to be amended; these amendments should both identify the articles to be amended and set their terms in order to implement the provisions of the MLI into domestic law to the extent they have been accepted by Germany. As of 1 January 2018, Germany started negotiations on a protocol to amend the existing DTTs with 17 of the 30 countries on the preliminary list of DTTs to be amended through the MLI.