• Service: Tax, Mergers & Acquisitions, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/17/2013

Germany - Taxation of portfolio dividends; gain, loss on mergers 

May 17: Recent developments concerning tax in Germany include a new law on the taxation of portfolio dividends and a proposal to amend the tax procedure rules.
  • A new law provides that portfolio dividends (for shareholdings of less than 10%, measured as of the beginning of the calendar year) received by corporate entities are generally subject to corporate income tax, and are no longer exempt from tax under Germany’s participation exemption regime (effective 95% exemption).
  • A proposed reduction of 10-year retention periods for accounting and tax records has been considered by the Bundestag.
  • A court decision affirmed the ability of companies to establish tax-deductible accruals for future tax and audit expenses.
  • A court decision found with respect to upstream mergers, merger-related gain or loss— when the inside basis of the transferring entity’s assets differ from the outside basis of the transferring entity’s shares—must be recognized also in mergers, demergers, or spin- offs when the transferee did not have an ownership interest in the transferring entity prior to the reorganization. Thus, the transaction costs are not tax deductible.

Read a May 2013 report [PDF 66 KB] prepared by the German Desk of KPMG LLP: International Tax Team (ITT): Germany

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