Germany

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, the Directive regarding the disclosure of income information by certain companies and branches (so-called public country-by-country-reporting) was transposed into national law in June 2023.

Mandatory reporting of cross-border tax arrangements (DAC 6)

With the Act Introducing An Obligation To Report Cross-border Tax Arrangements of 21 December 2019 (DAC 6 Act), Germany has implemented the provisions of the Directive amending the EU Mutual Assistance Directive 2011/16/EU (DAC 6) on the mandatory automatic exchange of information in the field of taxation on reportable cross-border arrangements. Since 1 July 2020, the regulations are to be applied.

The reportable tax arrangements included in the German provisions are mainly in line with the Directive. Germany has adopted the hallmarks listed in Annex IV of DAC 6 and has not added further hallmarks. In line with DAC 6, certain hallmarks will trigger a reportable tax arrangement only to the extent that the main benefit test (MBT) is met. Taxes covered under the latter are all taxes that are levied by the EU member states except VAT, customs duties, and specific excise duties.

The reporting for cross-border arrangements must be made electronically to the German Federal Tax Office ('Bundeszentralamt für Steuern') according to the officially prescribed data forms within 30 days after the start of the reporting period. In addition, with regard to so-called 'marketable cross-border tax arrangements' that do not have to be adapted individually, there are some special reporting periods and requirements.

Violations of the reporting obligation are treated as administrative offences and are punishable by fines of up to EUR 25,000.

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.

Germany transposed some of the measures developed by the OECD or provided for by the European Union into domestic law, in particular rules concerning the international exchange of information in tax matters. Further, applicable from 2018 onwards, 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.

In August 2016, the EU Anti-Tax Avoidance Directive (EU-ATAD) entered into force, which includes certain minimum standards to combat tax avoidance schemes (interest limitation rule, exit taxation, general anti-abuse rule, CFC rules, hybrid mismatch arrangements).

In May 2017, the Council of the European Union further adopted a directive amending the EU-ATAD (ATAD II) to address hybrid mismatch arrangements with third countries. The standards of the ATAD were implemented into German law in June 2021 through an amendment of the German CFC rules, an amendment of the rules on exit taxation, and the introduction of new rules on hybrid mismatch arrangements.

Together with numerous other countries, Germany signed the so-called 'Multilateral Instrument' (MLI) at an official signing ceremony on 7 June 2017. In a first step in November 2020, a Consent Act, which served to transpose the MLI into national law, passed through all its parliamentary procedures. Based on a further "Implementation Act" which passed parliamentary procedures in June 2024 nine German DTTs have been modified by means of the MLI (the date of application will be published in the Federal Gazette). Beyond the changes in the DTTs through the MLI, Germany is currently negotiating a number of bilateral agreements to modify other German DTTs or (respectively) has finalised the negotiations. These negotiations relate predominantly to selected elements of the MLI. So far, bilateral negotiations for an amendment to the DTTs have been finalised with numerous countries. The most recent amendments were to the DTTs with Sweden, Mexico, Bulgaria, Lithuania, Austria and Luxembourg, which entered into force in 2023 (and are applicable from 1 January 2024 onwards). 

Tax Haven Defence Act

The Tax Haven Defence Act of 25 June 2021 ('Steueroasenabwehrgesetz') contains tax defence measures in relation to tax jurisdictions that are mentioned in the Tax Haven Defence Ordinance (to provide, in particular, for restrictions on available deductions [Section 8], for stricter rules on CFC adjustments/add-backs [Section 9], for the expansion of WHT obligations [Section 10], for the suspension of the participation exemption under Section 8b Corporation Tax Act [Section 11], and for an expansion of the obligation to cooperate with the tax authorities [Section 12]).

The Tax Haven Defence Ordinance (in its most recent version of December 2023) includes the following jurisdictions:

• American Samoa
• Anguilla
• Antigua and Barbuda,
• The Bahamas
• Belize
• Fiji
• Guam
• Palau
• Panama
• Russian Federation,
• Samoa
• The Seychelles,
• Trinidad and Tobago,
• Turks and Caicos Islands,
• US Virgin Islands,
• Vanuatu.

The Tax Haven Defence Ordinance is generally intended to reflect the EU’s blacklist, but, in its current version, still contains the Bahamas, Belize, the Seychelles and Turks and Caicos Islands which were recorded in the October 2023 EU blacklist but not in the updated blacklist of February 2024. If these jurisdictions are also excluded from the EU blacklist at year-end 2024, the legislator will presumably mirror the EU blacklist for the purposes of an updated version of the Tax Haven Defence Ordinance. As a result, the defence measures would be expected to no longer be applicable to these jurisdictions with retroactive effect from 1 January 2024 onwards.