Germany

Germany publishes revised guidance on CbC reporting requirements

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The Germany Federal Ministry of Finance (MoF) on 11 July 2017 issued guidance on the Country-by-Country (CbC) reporting requirements in line with BEPS Action 13 and the EU Administrative Assistance Directive as amended. If certain requirements are met by a taxpayer, CbC reports must be prepared for the first time for financial years starting on 31 December 2015.

Further, the MoF on 19 July 2017 has published a revised Decree on the type, content and scope of Transfer Pricing Documentation Regulations. The Decree provides additional guidance on the documentation measures as a result of the Act that implemented the three-tiered approach of the transfer pricing documentation requirement at the end of 2016, as recommended by the OECD under BEPS Action 13. Accordingly, the reviewed transfer pricing documentation regulations have immediate effect and are applicable for the first time for financial years starting on 31 December 2016.

Germany releases guidance on CbC reporting requirements

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The Germany Federal Ministry of Finance on 11 July 2017 issued guidance on the Country-by-Country (CbC) reporting requirements in line with BEPS Action 13 and the EU Administrative Assistance Directive as amended. The guidance clarifies the provisions of the Act on the Implementation of the Amendments to the EU Mutual Liability Directive and other measures to prevent profit shifting. The obligations of multinational corporations to create and issue country specific reports were regulated in a newly introduced sec.138a of the German Tax Regulations.

Requirements: The guidance indicates that CbC reporting is effective for tax years starting after 31 December 2015. With respect to the reporting format and technical specifications, the guidance only makes a reference to the OECD XML schema and related User Guide.

In addition, the Ministry of Finance requires the three following tables to be completed:

  • Overview of the distribution of income, taxes and operations by tax jurisdiction;
  • List of all companies and establishments of the Group according to tax jurisdictions and their most important business activities; and
  • Additional Information.

Language: The country report can be submitted in English. The information or explanations contained in Table 3 of the BMF letter must be submitted in English, in accordance with Article 2b of Implementing Regulation (EU) 2015/2378.

Germany, Aruba signs TIEA

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On 29 June 2017, Germany and Aruba signed a tax information exchange agreement (TIEA). This Agreement provides the effective exchange of information regarding tax matters between the tax authorities including automatic exchange of information which is necessary for the exchange of financial account information based on the international standards formulated by the OECD, and is expected to contribute to the prevention of international tax evasion and tax abuse.

Canada: DTA negotiations with Germany

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The Finance Department of Canada has declared that negotiations to update its Double Tax Agreements (DTA) with Germany will be held in June 2017. The main objective of this release is to ensure that persons whose interests are affected have an opportunity to inform the Government of any particular issues of double taxation that might be resolved in a tax treaty. The Government is particularly interested in gathering knowledge of any difficulties encountered by Canadians under the German tax system so that these issues might be considered in negotiations. Persons are invited to give their comments regarding this negotiations and send it to the Finance Department.

Germany signs the Multilateral Convention to implement tax treaty related BEPS measures

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Finance Minister Schäuble signed the OECD Multilateral Instrument (MLI) on 7 June 2017 in Paris. The MLI instrument represents a vital step forward in the fight against base erosion and profit shifting (BEPS) and is a remarkable consensus agreed upon by OECD and G20 countries alike.

About 70 countries at all levels of development have signed this Multilateral Instrument (MLI) at the OECD Centre in the presence of Secretary-General OECD at the same time. A number of jurisdictions have also expressed their intention to sign the MLI as soon as possible and other jurisdictions are also actively working towards participation in the multilateral instrument.

Germany implements legislation that restricts the tax deductibility of related-party royalty payments

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The Federal Parliament and the Federal Council on 12 May 2017 and 2 June 2017 have agreed on the implementation of legislation which restricts the tax deductibility of the contributory payments under certain conditions. This royalty limitation rule is focused on situations where the royalty income is taxed as part of a special patent box regime that is not the “Nexus” approach to the Organization for Economic Cooperation and Development (OECD).

As soon as the German President signs the law, the rule applies to the license fees acquired after 31 December 2017.

Germany: Government approves signing of MLI to implement tax treaty related BEPS measures

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The German Federal Parliament on 21 December 2016, approved the signing of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. A signing ceremony is scheduled to be held on 7th June 2017 in Paris.

The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.