Germany

Corporate - Significant developments

Last reviewed - 09 July 2020

As elsewhere in the world over the last few months, the COVID-19-pandemic has and continues to dominate political action in Germany, including the tax legislation. In response to the economic impact of the COVID-19-pandemic, several tax measures have been or will be implemented to improve the liquidity of businesses and to stimulate the economy, inter alia, a temporary reduction of value-added tax (VAT) rates and an increase of the maximum loss carryback amount for 2020 and 2021 losses.

In December 2019, the legislative procedure for transposing the European Union (EU) Directive on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC 6 - (EU) 2018/822) into German law was concluded, implementing a reporting obligation for intermediaries and taxpayers applicable from 1 July 2020 onwards. The obligation also covers reportable cross-border arrangements made before 1 July 2020 when the first step in the implementation was made after 24 June 2018. Please note that due to the COVID-19-pandemic the option to defer the original first filing deadlines by six months was adopted at the EU level. Germany, however, has decided not to implement this provision, so that the original first filing deadlines remain unchanged in Germany.

In December 2019, the German Ministry of Finance released a draft bill regarding the transposition of the EU Anti-Tax Avoidance Directive (EU-ATAD - (EU) 2016/1164 and ATAD II - (EU) 2017/952) into German law. The draft bill provides for changes in several areas, including the German controlled foreign company (CFC) rules and rules regarding hybrid mismatches. Beyond the implementation of the EU Directives, various statutory regulations regarding transfer pricing should also be amended or implemented.

In the context of the discussions with respect to the taxation of the digital economy, the German Federal Ministry of Finance (Bundes-finanzministerium or BMF) together with the French Ministry of Economy and Finance (Ministère de l’Economie et des Finances) presented plans for a Global Anti Base Erosion (GloBe) Project. The intention is that this be discussed on an international level. Basically, it suggests implementing a world-wide minimum taxation (level playing field).

Furthermore, a draft bill was published in May 2019 by the Federal Ministry of Finance containing, inter alia, a tightening of the rules for levying Real Estate Transfer Tax (RETT) in connection with share transfers. Please note that there is currently no official timeline for the legislative procedure on this matter.

According to another bill enacted in December 2019, from 2021 onwards the amounts exempt from the solidarity surcharge are to be increased, so that many individuals will no longer be subject to it. This does not apply to corporate taxpayers, which are still subject to solidarity surcharge on corporation tax.

Various amendments to the Value Added Tax Act became law in December 2019 and on 1 January 2020, especially following the implementation of the EU Directive (EU) 2018/1910 (so-called 'quick fixes') into German law.