viernes, 10 de febrero de 2017

Germany: CbC reporting, relief from change-in-ownership rules and anti-double dip rule introduced

The tax bills containing measures that introduce country-by-country (CbC) reporting, amendments to the change-inownership rules and the introduction of an “anti-double dip” rule were published in Germany’s federal gazette on 23
December 2016, following approval by the upper house of parliament on 16 December 2016. The CbC reporting rules apply as from 1 January 2017 and the measures relating to the change-in-ownership rules apply retroactively to
ownership changes taking place after 31 December 2015. The anti-double dip rule applies to interest payments made after 31 December 2016.

CbC reporting: 
The law introducing CbC reporting is based on the recommendations in the OECD’s BEPS final reports and the amendments to the EU administrative cooperation directive. The CbC reporting rules apply for fiscal years beginning after 31 December 2015 (except for the “secondary mechanism,” which will apply only for fiscal years beginning after 31 December 2016). An obligation to prepare a master file for transfer pricing documentation purposes also is introduced.

Change-in-ownership rules: 
Also introduced is additional relief from the onerous change-in-ownership rules. (The change-in-ownership rules can result in the forfeiture of net operating loss (NOL) carryforwards, interest carryforwards and current-year losses in cases involving a direct or an indirect transfer of 50% or more of the shares in a company to one new acquirer, related parties or parties acting in concert.) Based on a new section in the Corporate Income Tax Code, the rules will not apply where the business operations of a loss corporation continue and are unchanged from the earlier of the company’s date of incorporation or the three previous calendar years before the change in ownership took place. If these conditions are fulfilled and the taxpayer submits an application to the tax authorities to apply the relief, the regular NOL carryforward will be converted into a “business continuance NOL carryforward” that will be available for use under the general rules for NOL carryforwards. However, the carryforward will be forfeited if one of the following occurs:

  • The business operations are discontinued, either temporarily or permanently;
  • The purpose of the business operations changes;
  • Additional business operations are taken over;
  • The company becomes a partner in a partnership;
  • The company becomes a controlling parent entity in a tax-consolidated group; or
  • Assets are transferred to the loss company at a value below fair market value for tax purposes.

The relief also does not apply if one these events occurred in the previous three calendar years before the ownership change.
Unlike the original proposal for the business continuance NOL carryforwards rule, the final version of the rule will not apply to NOL carryforwards that result from discontinued or dormant business operations of the company. The rule
also will not apply if the company was a controlling entity in a tax group or a partner in a partnership during the threeyear monitoring period before the “harmful” ownership change.
As noted above, the new relief measure applies retroactively for ownership transfers taking place after 31 December 2015, and applies for both corporate income tax and trade tax purposes.

Anti-double dip rule: 
The law also includes an anti-double dip rule for partnership structures. Under German tax law, interest expense incurred at the level of a partner of a partnership that is linked to the partnership business (e.g. interest expense related to the acquisition of the partnership interest) is treated as a “special business expense” and is deductible for tax purposes at the level of the partnership. If the partner is a nonresident, the partner becomes subject to limited German tax liability on its income from the partnership (a partnership is transparent for German corporate income tax purposes). The interest expense that qualifies as a special business expense, therefore, is deductible for German tax purposes, but also may be simultaneously deductible for foreign tax purposes at the level of the partner.
The deduction of such special business expenses of a partner in a partnership is disallowed to the extent such expenses also are tax deductible in a foreign jurisdiction. To the extent the expenses relate to income that also is taxed in a foreign jurisdiction, the expenses remain deductible.

Source: Deloitte

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