Corporate - Other issues

Last reviewed - 10 January 2020

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. 

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. 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 at 1 January 2018, Germany started negotiations on a protocol to amend the existing DTTs with 22 of the 30 countries on the preliminary list of DTTs to be amended through the MLI.