Germany

Corporate - Significant developments

Last reviewed - 30 June 2021

With the end of the parliamentary term approaching - the German Federal Parliament (Bundestag) election will take place in September 2021 – the current coalition finally concluded a number of changes to the tax law which have been anticipated for some time but which had been (repeatedly) postponed as no political agreement could be reached. In any event, throughout the last year the COVID-19-pandemic has given rise to new priorities for political action. Now in the last months of the parliamentary term, projects postponed before have been revived. 

In May 2021 a law amending the Real Estate Transfer Tax Act (RETTA – Grunderwerbsteuergesetz) was finally concluded; it will enter into force on 1 July 2021. The reform which was already proposed in 2019 introduces some tightening of the rules on the taxation of so-called share deals (for further information see chapter “Other taxes – Stamp taxes”. 

On 9 June 2021 the Act on the Modernisation of the Relief from and the Certification of Withholding Taxes came into force. The law provides for substantial changes to the current German anti-treaty shopping rules and creates higher obstacles for obtaining treaty relief compared to the earlier rules especially in relation to multi-tier holding structures. In addition, the Act also implements the so-called DEMPE-concept of the OECD into the German transfer pricing rules

On 25 June 2021 the Federal Council (Bundesrat) approved as the last step in the legislative procedure a law for the implementation of the EU Anti-Tax Avoidance Directive (EU-ATAD - (EU) 2016/1164 and ATAD II - (EU) 2017/952) into German law. The law provides for substantial changes of the German CFC-rules and implements the rules set out in ATAD and ATAD II regarding, inter alia, hybrid mismatches.

Only back in March 2021 a draft bill (bill for the Modernisation of Corporation Tax) was concluded by the German government to introduce an option for certain partnerships (namely KGs, OHGs and certain partnerships of professionals) to be taxed as corporations. In addition, the bill contains measures for an internationalisation of the Reorganisations Taxes Act for corporations, a reform of certain aspects of the German group relief (so-called Organschaft) rules and the abolition of the non-deductibility of currency losses connected to shareholder loans. On 25 June 2021 the German Federal Council approved the law as the last step of the legislative procedure.

On 25 June 2021  the German Federal Council also approved as the last step in the legislative procedure the so-called "Tax Haven Defence Act" (Gesetz zur Abwehr von Steuervermeidung und unfairem Steuerwettbewerb und zur Änderung weiterer Gesetze), which provides for the implementation of defence measures with regard to business relationships or shareholdings with links to certain states listed on the EU list of non-cooperative jurisdictions for tax purposes (“tax haven blacklist”). The provisions of the Act are to apply as of 1 January 2022.

On 28 May 2021 the German Federal Council finally approved a law to increase the competitiveness of Germany as a location for funds (so-called “Fondsstandortgesetz”). The Act is intended, inter alia, to transpose Directive (EU) 2019/1160 into national law and to provide tax incentives for employee equity investments (e.g. in order to support start-ups in attaining personnel). In addition, it contains a new provision that provides various tax incentives aimed at encouraging the generation of electricity from renewable energy sources and the expansion of charging stations for electric vehicles operated by real estate companies.

Within the Global Anti Base Erosion (GloBe)-Project the implementation of a world-wide minimum taxation (level playing field) was suggested by the Ministries of Finance of France and Germany for the first time in 2018. The proposal has gained recognition at an international level and in October 2020 the OECD published a report on the Pillar Two Blueprint (GloBE - Global Anti-Base Erosion Proposal). In April 2021 the project was again pushed forward with the US administration under Joe Biden supporting the concept. According to press releases the Finance Ministers of the G7 agreed on key points in June 2021, e.g. a world-wide minimum taxation of at least 15 %. An agreement of the Finance Ministers of the G20 on this topic should be achieved at their July 2021 summit.