Germany: Withholding tax challenges, repayment of contributions, current expenses

Germany: Withholding tax challenges

The KPMG member firm in Germany has prepared a report that summarizes the following recent tax developments:

Related content

  • A tax court case from Lower Cologne was referred to the Court of Justice of the European Union (CJEU), questioning the compatibility of the anti-treaty/-directive shopping rule under German tax law with the freedom of establishment and the EU Parent-Subsidiary Directive. Under German tax law, the reduction of withholding tax is subject to a condition that the recipient satisfies the activity requirement under the German ant-treaty/-directive shopping provision. A Dutch corporation (wholly owned by a German individual) held a 26.5% interest in a German company that satisfied the requirements for withholding tax relief under the EU Parent-Subsidiary Directive. The German tax authorities, however, denied a request for refund of withholding tax on capital gains paid, on the grounds of a lack of documentation. The lower tax court questioned the compatibility of the German tax provision with EU law.
  • The federal tax court (BFH) concluded that a tax-neutral repayment of contributions can also be made by a corporation domiciled in a third country. The BFH considered a requirement limiting application of this rule to companies domiciled in Germany or in the EU to be unconstitutional and contrary to European law.
  • The federal tax court (BFH) determined that current expenses may potentially have to be treated as selling costs within the meaning of the income tax law. 
  • A tax court case from Lower Munster concerns the non-deductibility of profit reductions in situations when corporations hold shares in other corporations. 
  • Entry into force of income tax treaties with Japan, Israel, and Costa Rica

 

Read a November 2016 report [PDF 379 KB] prepared by the KPMG member firm in Germany: German Tax Monthly

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.