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Nexia Ebner Stolz

Changes in tax law at year-end

The closer we get to year-end, the more effort companies put into calculating their tax burden for the last fiscal year and optimizing their future tax situation. Changes in the law that normally enter into force at the end of the year are pivotal in these calculations.

Dis­cus­sion of tax policy at the end of 2015 is domi­na­ted by the inhe­ri­tance tax reform. Howe­ver, as it is curr­ently assu­med that this reform will not enter into force until the begin­ning of 2016, busi­ness suc­ces­si­ons are still pos­si­ble in accor­dance with the exis­ting regu­la­ti­ons, which in the majo­rity of cases are more advan­ta­geous. Yet, a com­pany’s indi­vi­dual situa­tion or a change in its busi­ness model may also pre­sent oppor­tuni­ties for tax plan­ning and should the­re­fore be exa­mi­ned.

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Before the year comes to an end, it is addi­tio­nally worth taking a look at the chan­ges in tax law that have ente­red into force. With the Tax Amend­ment Act 2015 pub­lis­hed on Novem­ber 5, 2015, Ger­man law­ma­kers ful­fil­led many of the tasks set them by the Bun­des­rat, con­sti­tu­tio­nal law, and EU direc­ti­ves and resol­ved on amend­ments of the tax law, most of which are already retro­s­pec­ti­vely app­lica­ble. Con­se­qu­ently, these must be ref­lec­ted in tax returns for 2015.

The amend­ments pri­ma­rily affect con­tri­bu­ti­ons of sha­res. Since the begin­ning of the year, these can only have a tax-neu­tral effect if other con­s­i­de­ra­tion pro­vi­ded in addi­tion to new sha­res in a com­pany does not exceed cer­tain limits spe­ci­fied by law.

In addi­tion, in res­ponse to the ruling of the Federal Con­sti­tu­tio­nal Court, the valua­tion for real pro­perty trans­fer tax pur­po­ses chan­ged if in situa­ti­ons where no con­s­i­de­ra­tion was agreed (for instance in the case of a con­tri­bu­tion of sha­res or a trans­for­ma­tion) pre­vious pro­perty values were deter­mi­ned and used as the tax base. Now, the values that are also rele­vant for inhe­ri­tance tax pur­po­ses, which tend to be hig­her than the pre­vious pro­perty values, must be used — retroac­ti­vely back to 2009. Howe­ver, anyone who has already recei­ved a real pro­perty trans­fer tax notice or a notice of assess­ment about the valua­tion enjoys pro­tec­tion of legiti­mate expec­ta­ti­ons and does not need to expect a hig­her tax bur­den.

In the area of value added tax, con­struc­tion con­trac­tors still need to fol­low the legal regu­la­ti­ons clo­sely because law­ma­kers con­ti­nue to refrain from reac­ting to fis­cally unde­si­ra­ble legis­la­tion.

It is important to keep an eye on legis­la­tors’ plans to revise the taxa­tion of invest­ment funds, even though this is still a long way off. The curr­ently available dis­cus­sion draft on this mat­ter also envi­sa­ges taxing the gains on the dis­po­sal of sha­res held in free float that a cor­po­ra­tion rea­li­zes. Alt­hough the new regu­la­ti­ons are not expec­ted to enter into force until 2018, the future tax arran­ge­ments will gene­rally play a key role because in many cases invest­ment deci­si­ons are made on a long-term basis. 

The OECD’s action items for avo­i­ding base ero­sion and pro­fit shif­ting (BEPS) that have now been fina­li­zed seem to be equally far off. Where adapta­tion is requi­red, the Ger­man legis­la­tor will begin their trans­po­si­tion into natio­nal tax law as early as next year. Mul­ti­na­tio­nal cor­po­ra­ti­ons can expect regu­la­ti­ons on hybrid instru­ments and coun­try-by-coun­try repor­ting in parti­cu­lar.

What com­pa­nies will face next year in the area of acco­un­ting law is more con­c­rete. The Acco­un­ting Direc­tive Imp­le­men­ta­tion Act, which has brought Ger­man acco­un­ting prin­ci­p­les into line with EU regu­la­ti­ons, is effec­tive from the fis­cal year begin­ning on January 1, 2016. Along­side hig­her thres­holds for the size clas­ses of com­pa­nies, it inclu­des modi­fi­ca­ti­ons in the exemp­tion of sub­si­dia­ries from the duty to pre­pare con­so­li­da­ted finan­cial sta­te­ments, as well as a large num­ber of other chan­ges that affect both the annual finan­cial sta­te­ments and the mana­ge­ment report.

To keep the big­ger pic­ture in mind and make the best pos­si­ble use of exis­ting oppor­tuni­ties for tax plan­ning given the multitude of chan­ges, the Federal Asso­cia­tion of Ger­man Indu­s­try and Ebner Stolz have issued a joint guide on the “Chan­ges in Com­mer­cial and Tax Law 2015/2016” for the third conse­cu­tive year. In addi­tion to a con­cise, com­pre­hen­si­ble expla­na­tion of con­s­i­de­ra­ti­ons for tax plan­ning, this inclu­des all deve­lop­ments from 2015 that are rele­vant for imp­le­men­ta­tion plus all expec­ted chan­ges in 2016 toge­ther with an assess­ment by the Federal Asso­cia­tion of Ger­man Indu­s­try of, for example, the inhe­ri­tance tax reform, the invest­ment tax reform, and deve­lop­ments in the BEPS pro­ject from the per­spec­tive of busi­ness and indu­s­try.

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