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.