Germany draft tax legislation | KPMG | GLOBAL

Germany: Draft tax legislation includes BEPS measures, other items

Draft tax legislation in Germany

The Ministry of Finance (BMF) published a ministerial draft bill in June 2016 on implementation of country-by-country (CbC) reporting and other measures under the base erosion and profit shifting (BEPS) project.


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The ministerial draft bill is the first step for implementing the BEPS measures into German law. Additional BEPS measures—for example, in the areas of hybrid mismatch arrangements and CFC taxation—are expected to be included in subsequent bill. Completion of the legislative procedure is expected in the second half of 2016.

In addition to the BEPS-related proposals, the draft bill includes measures concerning:

  • The tax treatment of non-portfolio dividends of a controlled company in a tax group—a 5% deemed non-deductible business expense of the amount of the dividend is to be applied for trade tax purposes to dividends received by a controlled company (provided that the controlling entity is a corporation)
  • The trade tax treatment of the imputed income amount, so that the imputed income under the CFC rules will be subject to trade tax—trade tax will apply regardless whether the income was generated through a foreign corporation or a permanent establishment
  • Restriction of the participation exemption for credit institutions, financial service institutions, and financial undertakings

BEPS proposals

Among the provisions in the now pending legislation are measures for:

  • Implementation of the OECD recommendations regarding transfer pricing documentation (Master file, Local file, and CbC reports), for initial preparation for fiscal years beginning after 31 December 2015
  • Automatic exchange of cross-border tax rulings and advance transfer pricing arrangements between related enterprises, for advance tax rulings and advance arrangements entered into or amended since 1 January 2012
  • How to determine the arm’s length principle in tax treaty situations


Read a July 2016 report [PDF 418 KB] prepared by the KPMG member firm in Germany: German Tax Monthly (July 2016)

Other developments

Other topics discussed in this KPMG report concern legislation on the reform of investment taxation; court decisions about the thin capitalization rule in upstream loans, and about the taxation of “special partner” business income under the income tax treaty with Spain; and guidance from the tax authorities about the treatment of losses in the context of imputed income.

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