What to expect in 2018: changes in tax and business law

Accor­ding to the elec­tion plat­forms, com­pa­nies can hope for more tax incen­ti­ves for rese­arch and deve­lop­ment.

Despite the elec­tion cam­paign, howe­ver, there was by no means a stand­s­till on the tax front. Furt­her pro­gress has been made on nume­rous mea­su­res rela­ted to com­ba­ting harm­ful tax com­pe­ti­tion and the aggres­sive tax regi­mes of inter­na­tio­nal com­pa­nies. On 1 January 2018, for example, the “royal­ties bar­rier” comes into force, whe­reby Ger­man law­ma­kers have actually excee­ded the requi­re­ments deve­lo­ped at inter­na­tio­nal level. In June 2017, Ger­many sig­ned the so-cal­led "Mul­ti­la­te­ral Instru­ment" with almost 70 addi­tio­nal nati­ons. This will make it pos­si­ble in the future to adapt a large num­ber of exis­ting dou­ble taxa­tion agree­ments bet­ween the parti­ci­pa­ting coun­tries to inter­na­tio­nally agreed stan­dards using a dyna­mic pro­ce­dure - and thus more quickly than through bila­te­ral nego­tia­ti­ons. In addi­tion, in Sep­tem­ber 2017, EU finance minis­ters agreed on a joint ini­tia­tive to coun­ter the tax avo­i­dance stra­te­gies of glo­bal Inter­net com­pa­nies.

A Euro­pean Court of Justice pro­po­sal from the Federal Tax Court, which is being pus­hed for­ward by our firm and deals with the ques­tion of the EU law­ful­ness of the CFC rules, is cau­sing quite a stir. This pro­ce­dure is likely to be a rea­son for refor­ming for­eign tax law in the new legis­la­tive period.

Tax law and tax enfor­ce­ment are sub­ject to chan­ges in social and eco­no­mic con­di­ti­ons. As digi­tal tech­no­logy inc­rea­sin­gly affects all areas of life, the inc­rea­sing glo­bal eco­no­mic inte­g­ra­tion and demo­gra­phic deve­lop­ment pose great chal­len­ges. To this end, the legis­la­ture has imp­le­men­ted mea­su­res for the tech­ni­cal, orga­niza­tio­nal and legal moder­niza­tion of the taxa­tion pro­ce­dure, which will mainly take effect from 2018. Whe­ther this will bene­fit tax­pay­ers and not just the tax aut­ho­ri­ties will be shown in the practi­cal app­li­ca­tion.

Sup­po­sed tax sim­p­li­fi­ca­ti­ons will come into force on 1 January 2018 with the invest­ment tax reform. In many cases, retail invest­ment funds will become less attrac­tive due to the new tax regu­la­ti­ons.

The reform of sta­tutory audits by the EU and the Ger­man Imp­le­men­ta­tion Act (Audit Reform Act) has resul­ted in a change to the audi­tor's report in the audit opi­nion. In order to inc­rease the mea­ning­ful­ness of the audit opi­nion, to avoid misun­der­stan­dings about the tasks and con­tent of the audit ("expec­ta­tion gap") and to ensure inter­na­tio­nally uni­form repor­ting, the rele­vant IAASB inter­na­tio­nal stan­dards were intro­du­ced into Ger­man law. In the case of pub­lic inte­rest enti­ties (PIEs), the amen­ded repor­ting must be imp­le­men­ted for fis­cal years ending after June 16,2017. For all other com­pa­nies, ini­tial app­li­ca­tion is plan­ned for 31 Decem­ber 2018 at the latest.

Com­pa­nies are also con­cer­ned with the new requi­re­ments of the CSR Direc­tive Imp­le­men­ta­tion Act, which sti­pu­la­tes that non-finan­cial issues must also be pre­sen­ted in the mana­ge­ment reports. In parti­cu­lar, this requi­res infor­ma­tion on labor, social and environ­men­tal issues, respect for human rights and the fight against cor­rup­tion.

Lastly, com­pa­nies should by no means ignore the basic data pro­tec­tion regu­la­tion that will enter into force in 2018. This makes data pro­tec­tion one of the big­gest com­p­li­ance risks in com­pa­nies. Com­pa­nies will have to draw up and main­tain a con­c­rete plan of mea­su­res to imp­le­ment the spe­cial tech­ni­cal and orga­niza­tio­nal spe­ci­fi­ca­ti­ons, other­wise, they may have to pay dra­co­nian fines—­not to men­tion the sig­ni­fi­cant damage to their repu­ta­tion that this could cause.

What still awaits tax­pay­ers in 2018, what deve­lop­ments in tax and busi­ness law have taken place in 2017, and what arran­ge­ments might still be worthwhile in view of the new year, have been brie­fly and suc­cinctly out­li­ned by nume­rous spe­cia­list aut­hors of Ebner Stolz in the guide "Chan­ges in Tax and Busi­ness Law 2017/2018", the fifth edi­tion of which has been pub­lis­hed by Stoll­fuß Ver­lag. The guide is roun­ded off by an assess­ment of cur­rent tax policy by the Federal Asso­cia­tion of Ger­man Indu­s­try.