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Germany: Updated tax policy

On 27 November 2013, the German government published its tax policy for the upcoming four years. While not containing concrete, imminent measures the policy is a valuable insight into Germany's tax system actively countering base erosion and profit shifting.

On 27 November 2013, the new German government published a document that contains its tax policy for the upcoming four years. It does not contain any major tax reforms: the German government will be focussing on countering tax evasion and harmful tax practices – as mentioned in the OECD Base Erosion and Profit Shifting documentation. The German government aims to do this through the following actions:

  • Introducing country-by-country reporting for multinationals
  • Supporting the European initiative of a common corporate tax base (CCTB)
  • Introducing subject-to-tax provisions in German national law and tax treaties
  • Countering VAT fraud and the use of tax havens
  • Imposing regulatory measures on financial institutions that systematically violate German tax laws
  • Continuing the German support for the revision of the OECD model treaty and concluding tax information exchange agreements for the time being

Furthermore, Germany will take the following unilateral measures if consensus about these measures is not reached at OECD level by 2015:

  • Imposing a limit on the deductibility of payments made to recipients that lack substance
  • Creating a public register containing all German private individuals that have economic ownership in a trust
  • Denying the deductibility of licensing payments in Germany if the payments are not sufficiently taxed at the level of a foreign recipient

While the document lacks concrete, imminent tax measures, it is an interesting insight in the German tax policy for the upcoming four years. Companies that are active in the German market should be prepared for upcoming tax measures to counter base erosion and profit shifting and take any necessary precautions.

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