The German Ministry of Finance (MoF) published Letter No. 2024/0299051, outlining principles for implementing the Tax Haven Defense Act on 14 June, 2024. This final guidance, now expanded to 34 pages from the initial 31-page draft, offers valuable insights into the implementation of rules by tax authorities and their interpretation of legal provisions.

The guidance includes:

  •  The Act’s coverage extends to individuals, taxes, and designated tax havens, with specified timelines for implementing defensive measures.
  •  Section Eight of the Tax Haven Defense Act now provides clarified and enhanced explanations regarding the denial of deductions for business expenses.
  • Section Nine of the Tax Haven Defense Act now includes updated Controlled Foreign Company (CFC) rules, incorporating references to administrative guidance issued on 22 December, 2023 (recitals 201 to 209), while previous explanations have been removed.

In 2021, measures were enacted under the Tax Haven Defense Act in response to the European Council’s 2019 guidelines, urging EU member states to adopt legislative measures imposing penalties on jurisdictions listed as noncooperative for tax purposes on the EU list.