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.
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.