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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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