• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/1/2013

Germany - Identifying recipients of deductible payments; foreign tax-credits guidance 

November 1:  Germany’s federal tax court (Bundesfinanzhof - BFH) held that the tax authorities may require taxpayers to identify the recipients of payments that are deducted as businesses expenses. Otherwise, the deduction can be denied.

The case concerned shares acquired by a German company in two companies residing in Liechtenstein. For the tax years at issue, the taxpayer claimed a write-down of the shares to going-concern value. On subsequent audit, the tax authorities determined that the companies in Liechtenstein were "mailbox companies" and requested the taxpayer to identify who were the shareholders of these two companies and whether they were liable to tax in Germany. The tax authorities concluded that without such identification, the taxpayer was not entitled to the write-downs to going concern value.

The BFH agreed with this position, and discussed the reasonableness of a request for identification by the tax authorities.

Read a November 2013 report [PDF 1.48 MB] prepared by the KPMG member firm in Germany: German Tax Monthly (November 2013)

The KPMG report also includes other discussions of cases from the BFH concerning:

  • No book value transfers of assets between partnerships and the same partners
  • No violation of the "waiting period" provision in a case of a single partner GmbH & Co. KG
  • Attribution of a constructive dividend in a case of an undisclosed trustee relationship

Also included is a discussion of guidance from the federal ministry of finance (Bundesfinanzministerium) on foreign tax credits and an update on German income tax treaties.

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