Kindergeld

Customs Code Amendment 2.0 (“Annual Tax Act 2016”)

The Federal Cabinet passed a draft law on 25.3.2015 to implement the declaration on record regarding the law to adjust the tax code to the Community Customs Code and to change further tax regulations.

Background: On 19.12.2014, the Federal Government had announced in the Federal Council in a declaration on record regarding the law to adjust the tax code to the Community Customs Code and to change further tax regulations (in short: “ZollkodexAnpG”) that they would take up state proposals in a tax law at the beginning of 2015 regarding matters that were still outstanding and required examination.  This is now to be implemented with this amending law.

In this connection, the law takes up 13 measures that were proposed by the Federal Council in its statement on “ZollkodexAnpG” (see in this respect publication no. 18/3158 of the German Parliament):

  • Business Identification Number (Article 139c paragraph 5a sentence 4 AO – Clause 3 of the above-mentioned statement by the Federal Council)
  • Determination of withdrawal value when using an electric or hybrid-electric vehicle for private use (Article 6 paragraph 1 no. 4 sentence 3 Federal Income Tax Act EStG – clause 10 of the above-mentioned statement by the Federal Council)
  • Extension of income tax domestic terms to safeguard German taxation rights (Article 1 paragraph 1 sentence 2 Federal Income Tax Act EStG, Article 1 paragraph 3 Federal Corporation Tax Act KStG and Article 2 paragraph 7 no. 1 Federal Trade Tax Act GewStG – clause 18 of the above-mentioned statement by the Federal Council)
  • Binding effect of administrative orders for banks in cases of capital yield tax deduction (Article 44 paragraph 1 sentence 3 Federal Income Tax Act EStG – clause 33 of the above-mentioned statement by the Federal Council)
  • Editorial clarification in Article 44a Federal Income Tax Act EStG: no exemption order for those with limited tax liability (clause 34 of the above-mentioned statement by the Federal Council)
  • Group clause (Article 8c paragraph 1 sentence 5 Federal Corporation Tax Act KStG – clause 37 of the above-mentioned. statement by the Federal Council)
  • Land transfer tax in cases of changes to the partners/shareholders (Article 1 paragraph 2a sentence 2 – 4 German Real Estate Transfer Act GrEStG – clause 49 of the above-mentioned statement by the Federal Council)
  • Substantiation of duty of disclosure in cases of land transfer tax (Article 21 German Real Estate Transfer Act GrEStG – clause 50 of the above-mentioned statement by the Federal Council)
  • Closing loopholes in German Reorganisation Tax Act (Article 20 paragraph 2, Article 21 paragraph 1, Article 24 paragraph 2 UmwStG – clause 55 of the above-mentioned statement by the Federal Council)
  • Valuation of shares in corporations (Article 97 paragraph 1b Federal Valuation Law BewG – clause 51 of the above-mentioned statement by the Federal Council)
  • Removal of uncertainties in determination procedure (Article 154 paragraph 1 Federal Valuation Act BewG – clause 52 of the above-mentioned statement by the Federal Council)
  • Adjustment of material value method to material value guideline (Article 190 and appendices 22, 24 and 25 Federal Valuation Act BewG – clause 53 of the above-mentioned statement by the Federal Council)
  • Duty to disclose acquisition (Article 30 paragraph 4 no. 1 Federal Law on Inheritance and Gift Tax ErbStG – clause 54 of the above-mentioned statement by the Federal Council)

Other specialist regulatory requirements are also to be taken up. These include:

  • Removal of the requirement to name the function in the case of an investment (Article 7g Federal Income Tax Law EStG)
  • Implementation of the Directive 2014/86/EU – supplement of appendix 2 to Article 43b Federal Income Tax Act EStG with respect to favoured company forms relating to Poland and Romania.
  • Determination of income of support funds (Article 6 paragraph 5a – new – and Article 6a – new – Federal Corporation Act KStG)
  • Editorial adjustment of product descriptions to the customs tariff for the tax liability of the recipient in the case of metal deliveries (Appendix 4 to Article 13b paragraph 2 no. 11 Federal Value Added Tax Act UStG).

Note: The Federal Ministry of Finance believes some of the Federal Council matters should be handled in other legislative procedures, for example the future tax treatment of capital gains from diversified holdings and measures to neutralise the effects of hybrid tax planning. On other points, the Ministry believes there is still a need for agreement between the federation and the states, and they want to refrain altogether from differentiating benefits in kind from cash payments, from standardising the valuation standard for benefits in kind and the fiscal deduction of special expenses for children (see in this connection from page 40 of the above-mentioneddraft bill of 19.2.2015).

Time schedule: According to current information, the legislative procedure should be complete by the middle of October.