TAX & LEGAL NEWSFLASH - PUBLICATION OF DRAFT PROPOSAL REGARDING BORDER TAX ARRANGEMENTS IN GERMANY - PWC BLOGS
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
http://blogs.pwc.de/tax-and-legal/ 30 September 2019
Tax & Legal Newsflash
Publication of draft proposal regarding
mandatory disclosure rules for cross-
border tax arrangements in Germany
On 26 September 2019, the German Ministry of Finance has published a draft
proposal regarding the implementation of mandatory disclosure rules for cross-
border tax arrangements, which is now subject to a consultation process with
business and professional associations ending on 30 September 2019.
The reason for implementing such rules is the EU’s Council Directive
Tax Editorial Board
2018/822/EU which entered into force on 25 June 2018 regarding the mandatory
Gabriele Nimmrichter (automatic) exchange of information in tax matters with respect to reportable
PwC Germany cross-border arrangements (hereinafter DAC 6). DAC 6 amended Directive
+49 69 9585 5680 2011/16/EU. The EU Member States need to transform DAC 6 into national law
gabriele.nimmrichter@de.pwc.com by 31 December 2019. The mandatory disclosure rules must be applied as of 1 July
2020.
Emma Moesle
PwC Germany
When is a cross-border arrangement reportable?
+49 201 438 1975
emma.moesle@de.pwc.com
A tax arrangement needs to be reported if it is cross-border related, meets at least
one of the (so called) hallmarks and refers to taxes covered by the German
European Administrative Assistance Act. Taxes covered under the latter are all
taxes that are levied by the EU Member States except Value Added Tax (VAT),
customs duties and specific excise duties.
The hallmarks included in the German draft proposal are mainly in line with the
hallmarks listed in Annex IV of DAC 6. It is not intended to include additional
hallmarks.
In line with DAC 6, certain hallmarks will trigger a reportable tax arrangement only
to the extent that the main benefit test (MBT) is met. The MBT is met if it can be
established that the main benefit or one of the main benefits of a tax arrangement
is obtaining a tax advantage. The MBT must be considered in connection with
• Generic hallmarks referring to the relation between the intermediary (e.g.
lawyer, certified tax advisor, asset consultant) and the relevant taxpayer
(confidentiality clause, type of remuneration) or to characteristics of the
services rendered by the intermediary (standard documentation or
structure);
• Specific hallmarks, e.g. the acquisition of a loss-making company for loss
utilization purposes, the conversion of income into assets, gifts or low
taxed or tax exempt income or circular transactions of assets;
• Cross-border payments made between associated enterprises where the
corresponding income is tax exempt or benefits from a preferential tax
regime at the level of the recipient or where the recipient’s state of
residence does not impose corporate tax at all or only at a rate of (almost)
zero.
The draft proposal provides for a broad definition of the term “tax advantage”.
Amongst others, tax refunds, the reduction or the prevention of fiscal claims or
newsflash 1http://blogs.pwc.de/tax-and-legal/ 30 September 2019
their deferral into other taxation periods shall be treated as relevant tax advantage
under the MBT rule. In addition, tax advantages realized in other EU Member
States or non-EU countries are covered as well. However, no tax advantage is given
pursuant to the draft proposal if such tax advantage has an impact in Germany only
and is explicitly provided by German law.
Hallmarks applying without the MBT are:
• Cross-border payments made between associated enterprises where the
recipient is either not resident for tax purposes in any tax jurisdiction or
where the recipient is resident in a country which has been assessed by an
EU Member State or within the framework of the OECD as being non-
cooperative;
• Tax arrangements under which deductions for the same depreciation on
the asset or relief from double taxation in respect of the same item of
income or capital is claimed in more than one jurisdiction;
• The transfer of assets where there is a material difference regarding the
value of the assets between the respective jurisdictions involved;
• Specific hallmarks concerning automatic exchange of information and
beneficial ownership;
• Hallmarks concerning transfer pricing which involves the use of unilateral
safe harbour rules, the transfer of hard-to-value intangibles between
associated enterprises or intragroup cross-border transfer of functions,
risks or assets, if the latter causes a decrease of the projected annual profits
of the transferring entity by more than 50 % during a three-year
observation period.
In some points, however, the detailed design of the hallmarks under the German
draft proposal differs from DAC 6:
As an example, hallmarks relating to cross-border payments made between related
parties are only in scope of DAC 6 if such payments are tax deductible. Under the
current draft proposal, however, there must be a payment among related parties
only, i.e. the respective tax deductibility itself is not required.
Moreover and on a regular basis, the German draft proposal does not only capture
the transfer (between different legal entities) of, for example, intangibles and
functions, risks or assets, but also (alternatively) their transmission (i.e. between
an enterprise and its foreign permanent establishment).
In comparison with DAC 6, there is a limited scope for the hallmark concerning the
relief from double taxation in respect of the same item of income or capital that is
claimed in more than one jurisdiction. Such tax arrangements need to be reported
only to the extent that relief from double taxation in respect of the same item of
income or capital is claimed and, as a consequence of this, the income or capital
remains fully or partly untaxed.
Who needs to report?
Based on the draft proposal, the reporting obligation generally applies to the
intermediary. Intermediary is any person that markets and – for third parties –
designs, organises or makes available for implementation or manages the
implementation of a reportable cross-border tax arrangement.
There must be a German nexus of the intermediary: this is assumed for
intermediaries resident in Germany (seat, place of effective management, place of
newsflash 2http://blogs.pwc.de/tax-and-legal/ 30 September 2019
residence or habitual abode) and – for non-EU residents – if, for example, they
provide their services related to the arrangement through a German permanent
establishment. Intermediaries resident in other EU Member States are not subject
to reporting obligations in Germany.
If an intermediary is involved in a reportable cross-border arrangement, the
relevant “abstract” information (see below) must always be reported by the
intermediary (first reporting). Regarding the second reporting (information on the
relevant taxpayer, on the participants of the arrangement or on persons which
might be affected by the arrangement), the draft proposal contains two alternatives
if the intermediary is subject to a legal professional privilege (e.g. certified tax
advisor, auditor or lawyer):
1. The intermediary is released from his legal professional privilege by the
relevant taxpayer through a waiver. In such circumstances, the
intermediary has the obligation to do the second reporting as well.
2. If the intermediary will not be released from his legal professional
privilege, the relevant taxpayer needs to perform the second reporting.
Both reportings need to be made by the relevant taxpayer if he has developed the
respective arrangement himself.
What types of information need to be reported?
The reporting to the German tax authorities consists of two parts: the first
reporting includes “abstract information” comprising (among others):
• Information on the intermediary/intermediaries,
• Details of the hallmarks which triggered the reporting obligation,
• Summary of the content of the mandatory cross-border tax arrangement,
• The (economic) value of the reportable cross-border arrangement,
• The (envisaged) date on which the first step in implementing the
reportable cross-border arrangement has been or will be made and
• Details of the relevant provisions of all EU Member States concerned by
the tax arrangement.
The second reporting includes personal information concerning the taxpayer and
the respective arrangement, which are:
• Information about the relevant taxpayer,
• Information about the related entities participating in the arrangement,
• Any other person in a Member State likely to be affected by the reportable
cross-border arrangement (if known).
Once the first reporting has been made, the intermediary will receive a registration
number for the reported tax arrangement and a “disclosure number” for the
individual reporting. Both numbers must be communicated to the relevant
taxpayer. To the extent that the intermediary knows of other intermediaries
involved in the tax arrangement, he must also provide the registration number to
those other intermediaries.
Besides, the aforementioned numbers must be stated in the first tax return that will
be impacted by the tax advantage.
Procedures and deadlines for reporting?
The reporting for cross-border arrangements must be made electronically to the
newsflash 3http://blogs.pwc.de/tax-and-legal/ 30 September 2019
German Federal Tax Office (“Bundeszentralamt für Steuern”) according to the
officially prescribed data forms.
The reporting must be made within 30 days beginning on the day after:
• the reportable cross-border arrangement is made available for
implementation or
• the relevant taxpayer is ready for implementing the cross-border
arrangement or
• at least one relevant taxpayer has taken the first step of implementing the
cross-border arrangement.
The deadline will be triggered by the event whichever occurs first.
Which are the potential penalties in case of non-compliance with the
obligations?
Based on the draft proposal, violation of the mandatory reporting obligation may
trigger penalties up to EUR 25,000. A penalty could be assessed if the reporting (i)
is not made, (ii) is incomplete or (iii) is not made in time. Penalties may be
assessed for tax arrangements where the first step of implementation is/was made
after 30 June 2020.
Penalties up to EUR 25,000 can be assessed as well if the registration and/or the
“disclosure” number was not stated in the first tax return impacted by the tax
advantage of the arrangement.
What will happen to the information reported?
The German Federal Tax Office will evaluate the information regarding the
reported cross-border arrangements. The results will be disclosed to the German
Federal Ministry of Finance. The latter will further inform the higher tax
authorities of the relevant German Federal States to the extent that the taxes
affected are fully or partly assessable by those Federal States or their local
municipalities.
Moreover, the information reported will be uploaded to a central register that can
be accessed by authorities of other EU Member States.
When to apply the new rules?
The new mandatory disclosure rules are applicable as of July 1, 2020.
However, it should be noted that for such cross-border arrangements where the
first step of implementation has been or will be made after 24 June 2018 and until
30 June 2020 must reported between 1 July 2020 and 31 August 2020.
Data Protection
Data processing for the purposes of the distribution of the Newsletter is performed
on the basis of your consent. You can unsubscribe from the Newsletter at any time
with effect for the future and revoke your consent.
newsflash 4http://blogs.pwc.de/tax-and-legal/ 30 September 2019
Subscribe/Unsubscribe
You may take out a new subscription to the newsletter with a simple e-mail to:
SUBSCRIBE_PwC_Mandanteninformation@de.pwc.com
Existing subscriptions may be cancelled any time at:
UNSUBSCRIBE_PwC_Mandanteninformation_E@de.pwc.com
The information contained in this newsletter was intended for our clients and correct to the best of the
authors’ knowledge at the time of publication. Before making any decision or taking any action, you
should consult the sources or contacts listed here. The opinions reflected are those of the authors.
© 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member
firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
www.pwc.de
newsflash 5You can also read
