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. In December 2019, the legislative procedure for transposing DAC 6 into German law was concluded implementing a reporting obligation for intermediaries and taxpayers applicable from 1 July 2020 onwards. 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. Please note that due to the COVID-19 pandemic, the possibility of a deferral of the original first filing deadlines by six months was adopted at the EU level. Germany, however, has decided against implementing this provision, so that the original first filing deadlines still apply in Germany.
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 mismatches). In May 2017, the Council of the European Union further adopted a directive amending EU-ATAD (ATAD II) to address hybrid mismatches with third countries. In December 2019, the German Ministry of Finance published a draft bill for the transposition of EU-ATAD and ATAD II into German law.
Together with numerous other countries, Germany signed the so-called 'Multilateral Instrument' (MLI) at an official signing ceremony on 7 June 2017. In May 2020, the German Federal Government released a draft bill regarding the transposition of the MLI into German law. Based on this draft, 14 German DTTs are expected to be modified by means of the MLI. In addition to this 'transposition bill', a further 'implementation bill' (no draft until now) will be necessary in Germany to modify these DTTs. Beyond the changes in the DTTs by means of the MLI, Germany is currently negotiating a significant number of bilateral agreements to modify other German DTTs. These negotiations refer predominantly to selected elements of the MLI.