German Tax Law Research Articles

Critical Review Of The Atad Implementation: Addressing Base Erosion and Profit Shifting: The Implementation of the ATAD in Germany

Germany has been an active supporter of the Base Erosion and Profit Shifting (BEPS) Project from its initiation and has also whole-heartedly supported the implementation of core BEPS recommendations in Europe through the anti-tax avoidance directive (ATAD). However, the subsequent domestic implementation process took longer than expected. It was only in June 2021 that the last remaining pieces of the ATAD were transposed into German tax law. This article explains Germany’s perspective on the ATAD more generally and describes which parts of domestic tax law have been amended in order to ensure conformity with the directive. ATAD implementation in Germany, CFC, interest deduction limitation, GAAR, exit taxation, hybrid mismatches

Moral und Grenzverhalten im Steuerrecht – Zur Rechtsverwirklichung im Steuerrecht und zur neuen Anzeigepflicht für Steuergestaltungen

The enforcement of tax law in practice depends to a large extent on the tax morale of taxpayers. Behaviour which goes to (or even exceeds) the legal limits in order to achieve tax benefits, such as aggressive tax planning, endangers tax morale. However, anti-abuse provisions in substantive law have not proved to be very effective against such behaviour. It is therefore of interest to the legal system as a whole that German tax law, with its obligation to report potentially aggressive cross-border tax planning arrangements, has introduced a means that promises to counteract such behaviour much more effectively than previous approaches.

Case Law Notes: Landmark Transfer Pricing Case on Applying the Arm’s Length Principle to Shareholder Loans in Germany

This article examines the Federal Tax Court’s landmark decision of 27 February 2019 on the application of the arm’s length principle under German tax law. The Federal Tax Court reaffirmed that the mere absence of security/collateral does not justify re-characterizing a shareholder loan into equity. More importantly, the court held that German transfer pricing rules permit not only an adjustment of the price of a controlled transaction for the purpose of determining a taxpayer's income but allows, beforehand, the alteration of other terms or conditions that were made between the related parties, replacing actual conditions by arm’s length conditions. More specifically to the disputed case of an unsecured shareholder loan, an arm’s length loan must now be determined on the rebuttable presumption that the loan is deemed to be secured, even if no security has actually been provided or, presumably, the interest rate includes a risk premium. Arguably, the court denied the significance of implicit group support as a general rule. All this could further expand the reach of transfer pricing adjustments in Germany. In audit practice, it is expected that other terms and conditions of controlled transactions – apart from the price – will be now increasingly scrutinized in German tax audits.

Exploring adoption determinants of tax-subsidized company-leasing bicycles from the perspective of German employers and employees

Abstract Since 2012, when changes in German tax law were made, the purchases of tax-subsidized company-leasing bicycles (including s-pedelecs and electrically assisted bicycles) have increased in Germany. However, it is largely unknown what factors determine whether employers and employees adopt the bicycle-leasing program or not. In the case study, the authors analyzed relevant documents as well as interviewed 22 employer representatives and 22 employees and analyzed their responses to explore both the adoption drivers and barriers. Informed by Diffusion of Innovations Theory, categories of perceived innovation characteristics as well as categories that go beyond this conceptualization were identified. In particular, the study explored various facets in relation to relative advantage and complexity, providing insights into how benefit-and-cost trade-offs determine the perceived value of the concept as well as how difficulties in usability may either postpone or hinder the adoption of the concept. Categories relating to compatibility, trialability, and observability as well as additional categories such as involvement of key stakeholders (employer and employee level) and seasonality (employee level) were explored. The case study derives several policy and managerial implications that should help promote the adoption of company-bicycle leasing bicycles in particular and cycling as a means of active transportation in general.

Die Verwirklichung steuerlicher Lasten im System der Steuerrechtsordnung

Over the past decades, German tax law has systematically ordered the substantive tax law of Germany. However, the question of how tax burdens can actually be realized in practice has so far been viewed primarily as a problem of tax procedural law. The following article attempts to extend the general system of German tax law to covering this aspect. For this purpose, the article makes reference to the so called "Steuerungstheorie" developed in German public law. The article explains on this basis the importance of tax compliance from a systematic point of view for tax law.

Exploring adoption determinants of tax-subsidized company-leasing bicycles from the perspective of German employers and employees

Since 2012, when changes in German tax law were made, the purchases of tax-subsidized company-leasing bicycles (including s-pedelecs and electrically assisted bicycles) have increased in Germany. However, it is largely unknown what factors determine whether employers and employees adopt the bicycle-leasing program or not. In the case study, the authors analyzed relevant documents as well as interviewed 22 employer representatives and 22 employees and analyzed their responses to explore both the adoption drivers and barriers. Informed by Diffusion of Innovations Theory, categories of perceived innovation characteristics as well as categories that go beyond this conceptualization were identified. In particular, the study explored various facets in relation to relative advantage and complexity, providing insights into how benefit-and-cost trade-offs determine the perceived value of the concept as well as how difficulties in usability may either postpone or hinder the adoption of the concept. Categories relating to compatibility, trialability, and observability as well as additional categories such as involvement of key stakeholders (employer and employee level) and seasonality (employee level) were explored. The case study derives several policy and managerial implications that should help promote the adoption of company-bicycle leasing bicycles in particular and cycling as a means of active transportation in general.

The Significance of Fundamental Human Rights for German Tax Law

The Significance of Fundamental Human Rights for German Tax Law

The implications of ‘Brexit’ under German tax law: expected changes for UK businesses, corporations, and trusts with Germany-based owners and beneficiaries

In the referendum held on 23 June 2016, the British people voted to leave the European Union (EU). Whereas the economic impact of ‘Brexit’ is being discussed extensively, its tax implications have not yet been the focus. It is obvious that ‘Brexit’ will end the UK’s membership in the Customs Union as well as the UK’s participation in the harmonized European system for value-added taxes and excise duties. Less obvious is the impact of ‘Brexit’ on certain provisions of German national tax law that link preferential treatment to EU or European Economic Area membership: ‘Brexit’ will change the tax treatment of German-based shareholders and beneficiaries of UK businesses, companies, trusts, and foundations for the worse.

Kinderfreibeträge in der gesetzlichen Rentenversicherung

The future of the German pay as you go public pension system is dependent on families with children. In contrast to German tax law, there are no child allowances in the social insurance system. As a result, workers with and without children pay the same pension insurance contributions. This article analyses the introduction of a child allowance into the public pension system in Germany. We quantify the fiscal, distributional and behavioural effects of such a reform.

Oszustwo podatkowe a przestępstwo oszustwa w prawie polskim i niemieckim

Artykuł dotyczy przestępstwa oszustwa podatkowego w niemieckim oraz w polskim prawie karnym. Przestępstwa te należą do nielicznej grupy czynów stanowiących delikty podatkowe, które zagrożone są karą kryminalną w ustawodawstwie niemieckim. W niemieckim porządku prawnym bowiem ustawodawca zdecydował się na kryminalizację tego obszaru patologii jedynie w wąskim zakresie, w przeciwieństwie do naszego rozwiązania, w którym funkcjonuje odrębna ustawa karna penalizująca kilkadziesiąt naruszeń dotyczących finansów publicznych. Przedmiotem rozważań jest ustalenie, w jakim zakresie znamiona przestępstwa oszustwa podatkowego z Kodeksu karnego skarbowego oraz niemieckiej Ordynacji podatkowej pokrywają się ze znamionami klasycznego przestępstwa oszustwa, określonego w polskim oraz niemieckim Kodeksie karnym, a także jakie wynikają z tego konsekwencje.

Legal Uncertainty in the Application of the German CFC Rules

In this article, the authors describe the currently uncertain legal situation regarding the tax treatment of controlled foreign companies (CFCs) under German tax law. The authors focus on recent developments in the German tax treatment of CFCs and highlight consequences for investors in Germany.

European Commission: Implementation of OECD’s Base Erosion and Profit Shifting Actions

Die Arbeiten an der Gemeinsamen konsolidierten Korperschaftsteuer-Bemessungsgrundlage GKKB gehen weiter. Allerdings dient der am 28. Januar 2016 von der Kommission veroffentlichte Richtlinienentwurf primar der Einschrankung von als unerwunscht angesehenen Steuergestaltungen. Das ursprungliche Ziel der GKKB, die steuerlichen Nachteile fur grenzuberschreitende Geschaftstatigkeiten zu beseitigen, ist in den Hintergrund getreten. Der Entwurf beinhaltet eine allgemeine Missbrauchsvorschrift, Einschrankungen beim Zinsabzug, Regelungen zu hybriden Gestaltungen, eine Switch-over-Clause (Ubergang von der Freistellungsmethode zur Anrechnungsmethode), Regelungen zur Hinzurechnungsbesteuerung sowie zur Exit-Besteuerung. Viele der vorgeschlagenen Masnahmen weisen eine starke Ubereinstimmung mit den im deutschen Steuerrecht geltenden Normen auf.

The German Federal Fiscal Court: An Overview

In this article, the author describes the organization and functioning of the German Bundesfinanzhof (Federal Fiscal Court) and his approach to select issues of German (international) tax law.

Germany’s Fiscal Court Rules on Tax Deductibility of Donations to Foreign Charities

In a most recently published judgment (8 May 2015), the German Federal Fiscal Court 1 specified the requirements under German tax law regarding the deductibility of donations to foreign charitable organizations. Whereas the national German written law rules as such are rather straight-forward and clear, these rules had to be interpreted in the light of recent ECJ rulings. In that regard, the German Federal Fiscal Court rendered a landmark decision with far-reaching consequences.

Tax Treaty Treatment of Start-Up Expenses in Connection with the Establishment of a PE

The author discusses the questions of attribution of income derived prior to the establishment of a Permanent Establishment (PE) based on a decision of the German Federal Fiscal Court. Therefore, the author gives an overview of the Court's findings, which lead to tax exemption of expenses incurred for establishing a PE, even if the PE fails. These findings are discussed thereafter with regard to the interpretation of treaties under particular consideration of the Treaty's purpose. This is because tax exemption of expenses relating to a failed PE leads to non-recognition of expenses, which may be regarded as a form of double taxation. Further, practical implications are discussed, whereat the author addresses implications of the ECJ's case law on the recognition of 'final losses' as well as of a Treaty Override clause in German Tax Law. Consequently, the author disagrees with the position taken by the Court and the German tax authorities. While attribution of income to a PE should not depend on the time when income is derived, to effectively avoid non-recognition of income, attribution should, in the author's view, not occur before existence of a PE.

The Tax Treatment of Shareholder Loans in Germany

This article describes the tax treatment of shareholder loan impairments under German tax law within the context of the German national participation exemption regime. In particular, the changes introduced by a recent amendment to the German Income Tax Act are highlighted. The article traces the historical development leading up to the legislative change and analyses the key features of the new provision.

The Legal Nature of the Tax Return about Wage Tax in German Tax Law

The Legal Nature of the Tax Return about Wage Tax in German Tax Law

Radykalne uproszczenie prawa podatkowego w ujęciu Paula Kirchhofa

Artykuł dotyczy koncepcji Paula Kirchhofa uproszczenia prawa podatkowego. Została ona przedstawiona w projekcie Bundessteuergesetzbuch: Ein Reformentwurf zur Erneuerung des Steuerrechts (Federalny kodeks podatkowy: projekt reformy dla odnowienia prawa podatkowego [2011]). Projekt uproszczenia prawa podatkowego Kirchhofa jest próbą odpowiedzi na dobrze rozpoznane słabości współczesnych systemów podatkowych i powtarzające się wezwania do ich reformy. Choć kodeks został stworzony z myślą o Niemczech, nieukrywane ambicje heidelberskiego profesora są większe. Zgodnie z nimi jego koncepcja uproszczenia prawa podatkowego może być zastosowana w innych państwach, a częściowo także w regulacjach podatkowych w prawie Unii Europejskiej. Celem artykułu jest zapoznanie czytelnika z motywacjami Kirchhofa, przyjętymi przez niego założeniami, a także podstawowymi regulacjami projektu. W miejsce ponad 30 podatków występujących w prawie niemieckim projekt pozostawia jedynie cztery: podatek dochodowy, podatek od spadków i darowizn, podatek obrotowy oraz podatek akcyzowy. Znacznie ograniczona została liczba wyjątków, zwolnień i regulacji szczególnych. W efekcie zamiast ponad 50 000 paragrafów obowiązującego prawa podatkowego proponowana regulacja zawiera tylko 237 paragrafów. Jest to pierwsze omówienie koncepcji Kirchhofa w polskiej doktrynie prawa. Zdaniem autora artykułu przedstawiony przez Kirchhofa kodeks zasługuje na pozytywną ocenę, może być wzorem dla nadaktywnego ustawodawcy oraz inspiracją dla reform systemów podatkowych we współczesnym świecie. Autor artykułu dostrzega jednak problem uzyskania przez tego rodzaju projekt trwałej akceptacji doktryny prawa, partii politycznych i opinii publicznej.

Tax-optimal step-up and imperfect loss offset

AbstractIn the field of mergers and acquisitions, German and international tax law allow for several opportunities to step up a firm’s assets, i.e., to revaluate the assets at fair market values. When a step-up is performed the taxpayer recognizes a taxable gain, but also obtains tax benefits in the form of higher future depreciation allowances associated with stepping up the tax base of the assets. This tax-planning problem is well known in taxation literature and can also be applied to firm valuation in the presence of taxation. However, the known models usually assume a perfect loss offset. If this assumption is abandoned, the depreciation allowances may lose value as they become tax effective at a later point in time, or even never if there are not enough cash flows to be offset against. This aspect is especially relevant if future cash flows are assumed to be uncertain. This paper shows that a step-up may be disadvantageous or a firm overvalued if these aspects are not integrated into the basic calculus. Compared to the standard approach, assets should be stepped up only in a few cases and — under specific conditions — ata later point in time. Firm values may be considerably lower under imperfect loss offset.

Aufkommens- und Verteilungsfolgen des Ersatzes des deutschen einkommensteuerlichen Formeltarifs durch einen Stufentarif

AbstractA simplification of the German tax law is the major intend when proposing a graduated tax rate to replace the current German formula based tax scale. A plain tax rate structure requires catchy tax brackets (e.g. in 5.000 € or 10.000 € steps) and tax rates (e.g. tax rate differences of 5% or 10%). Our empirical analysis shows that such a graduated tax rate causes significant distributional effects and, depending on the particular form, affects different groups of tax payers in different ways. This holds in particular for the two graduated tax rate proposals from the German Liberal Party which additionally provoke substantial revenue losses. A graduated tax rate with little revenue and distributional effects compared to the current formula based tax scale lacks a plain structure and hence conflicts with the objective of tax simplification.