On 20 July 2023, the Federal Ministry of Finance (BMF) issued draft guidance concerning the implementation of the Foreign Transactions Tax Act (FTTA), specifically addressing the taxation aspects related to controlled foreign corporations (CFCs). The purpose of the preliminary guidance is to update the previously issued BMF guidance from 14 May 2004, with regard to the application of the Foreign Transactions Tax Act (FTTA), so that it aligns with the current legal framework.
Notably, the enactment of the Anti-Tax Avoidance Directive (ATAD Implementation Act) on 25 June 2021, as published in Federal Law Gazette I 2021 on page 2035, brought about significant modifications, particularly in the areas of exit taxation (Section 6 FTTA) and controlled foreign corporations (CFC) taxation (Sections 7 to 13 FTTA).
The proposed draft guidance is intended to be effective for the relevant sections of the FTTA starting from 1 July 2021, with consideration for the application provisions outlined in Section 21 of the FTTA. Feedback and comments on the draft guidance are requested to be submitted by 4 September 2023.
