Nexia European Tax Group Meeting 28 May 2008, Vienna

Nexia European Tax Group MeetingNexia European Tax Group Meeting

28 May 2008 , Vienna28 May 2008 , Vienna

Shipping and Yachting –Shipping and Yachting –

Advantages of the Maltese FlagAdvantages of the Maltese Flag

Karl Cini – Brian Tonna & Co. - MALTAKarl Cini – Brian Tonna & Co. - MALTA

The Maltese FlagThe Maltese Flag

• Malta has one of the largest ship registries worldwide and the main reason Malta has one of the largest ship registries worldwide and the main reason for such success is that Maltese registered ships benefit from various for such success is that Maltese registered ships benefit from various advantages.advantages.

• Malta is an E.U. member and vessels flying the Maltese flag are deemed to Malta is an E.U. member and vessels flying the Maltese flag are deemed to be E.U. Vessels. be E.U. Vessels.

• The Maltese Flag has been upgraded to the White list on the Paris MoU, The Maltese Flag has been upgraded to the White list on the Paris MoU, making unnecessary controls less likely on ships flying the Maltese flag. making unnecessary controls less likely on ships flying the Maltese flag.

• Malta also has bilateral agreements with foreign governments where Maltese Malta also has bilateral agreements with foreign governments where Maltese Ships receive preferential treatment in respect of Port charges and taxes.Ships receive preferential treatment in respect of Port charges and taxes.

The Maltese Flag - AdvantagesThe Maltese Flag - Advantages

• Low costs and swift registration of the owning or operating Low costs and swift registration of the owning or operating company and of the vessel. company and of the vessel.

• Complete exemption from all local taxes favour owners, Complete exemption from all local taxes favour owners, charterers and financiers of Maltese ships in respect of profits charterers and financiers of Maltese ships in respect of profits derived from the ownership, sale, operation, chartering and derived from the ownership, sale, operation, chartering and financing of Maltese ships.financing of Maltese ships.

• Exemption from all duties and other charges in respect the sale Exemption from all duties and other charges in respect the sale or transfer of a ship and the allotment of any share or stock of a or transfer of a ship and the allotment of any share or stock of a company owning such a ship; and from succession duties, company owning such a ship; and from succession duties, capital gains tax, VAT and also in respect of exchange control capital gains tax, VAT and also in respect of exchange control formalities. formalities.

Registration (i)Registration (i)

• All types of vessels, from pleasure yachts to oil rigs, may be All types of vessels, from pleasure yachts to oil rigs, may be registered although there may be some restrictions on vessels of registered although there may be some restrictions on vessels of twenty-five years or more.twenty-five years or more.

• No restriction on nationality of Masters, owners and crew.No restriction on nationality of Masters, owners and crew.

• No restrictions on sale and mortgaging of Maltese ships. No restrictions on sale and mortgaging of Maltese ships.

• It is possible to register ships which are under construction as It is possible to register ships which are under construction as well as other marine structures such as oil floating docks, well as other marine structures such as oil floating docks, floating hotels pontoons and barges.floating hotels pontoons and barges.

Registration (ii)Registration (ii)

• Simple procedure for the closing of the registry.Simple procedure for the closing of the registry.

• Easy and immediate access to the decision makers of the shipping industry Easy and immediate access to the decision makers of the shipping industry minimizing costly delays.minimizing costly delays.

• Bareboat charter registration both inwards and outwards; and the certificate Bareboat charter registration both inwards and outwards; and the certificate of registry may be issued in the name of the vessel's charterer (including a of registry may be issued in the name of the vessel's charterer (including a time charterer). time charterer).

• Low costs, including registration, tonnage dues and professional fees both Low costs, including registration, tonnage dues and professional fees both for the registration and administration of company and vessel. for the registration and administration of company and vessel.

Registration (iii)Registration (iii)

• Time necessary for the registration of the company is 24 hours. Time necessary for the registration of the company is 24 hours. The vessel can be registered on the next day. The vessel can be registered on the next day.

• Adequate safeguards to the mortgagees making the finance of Adequate safeguards to the mortgagees making the finance of Maltese vessels more secure and attractive for the banks.Maltese vessels more secure and attractive for the banks.

• The Malta Maritime Authority also offers a twenty four hours The Malta Maritime Authority also offers a twenty four hours service seven days a week providing emergency services.service seven days a week providing emergency services.

Yachts – Why Malta ?Yachts – Why Malta ?

• Comprehensive “one-stop-shop” servicesComprehensive “one-stop-shop” services

• Pleasure craft and commercial vesselsPleasure craft and commercial vessels

• Hand-holding of clients who wish to build a new yacht or buy a second-hand Hand-holding of clients who wish to build a new yacht or buy a second-hand yachtyacht

• Advice on finance for acquisition (tailor-made solutions)Advice on finance for acquisition (tailor-made solutions)

• Assistance in the negotiation of related agreementsAssistance in the negotiation of related agreements

• Registration proceduresRegistration procedures


• Importation of the yacht into EU watersImportation of the yacht into EU waters

• Customs and VAT formalitiesCustoms and VAT formalities

• Reputable jurisdiction (EU Member State flag)Reputable jurisdiction (EU Member State flag)

• Expeditious proceduresExpeditious procedures

• Efficient flag State authoritiesEfficient flag State authorities

• No restrictions on ownership (with the possibility of using Maltese No restrictions on ownership (with the possibility of using Maltese companies or international owners) or on use of the yacht companies or international owners) or on use of the yacht


• No restrictions on nationality of crew employed on board No restrictions on nationality of crew employed on board commercial vesselscommercial vessels

• No social security obligations in respect of crewNo social security obligations in respect of crew

• Low registration costs and company incorporation costsLow registration costs and company incorporation costs

• Fiscal benefits (including possible total exemption from income Fiscal benefits (including possible total exemption from income tax)tax)


• No capital gains on transfer of the yachtNo capital gains on transfer of the yacht

• Low effective VAT rate upon importation (can be reduced to Low effective VAT rate upon importation (can be reduced to between 5.4% and 6.2% on yacht’s value upon importation between 5.4% and 6.2% on yacht’s value upon importation using lease structures)using lease structures)

• Competitive charges for servicesCompetitive charges for services

• Excellent berthing and maintenance facilitiesExcellent berthing and maintenance facilities

Yachts – A practical exampleYachts – A practical example

• VAT at 18% is payable over an estimated percentage portion of VAT at 18% is payable over an estimated percentage portion of the lease based on the time that the craft is used within the the lease based on the time that the craft is used within the territorial waters of the EU.territorial waters of the EU.

• The percentages are set in accordance to the length of the craft The percentages are set in accordance to the length of the craft and its means of propulsion.and its means of propulsion.

Yachts – A practical exampleYachts – A practical exampleType of craft % of lease subject to VAT Effective rate of VAT

Sailing boats or motor boats over 24m long 30% 5.4%

Sailing boats between 20.01m-24m in length 40% 7.20%

Motor boats between16.01m-24m in length 40% 7.20%

Sailing boats between 10.01m-20m in length 50% 9%

Motor boats between12.01m-16m in length 50% 9%

Sailing boats up to10m in length 60% 10.80%

Motor boats between7.51m-12m in length

(if registered in a commercial register) 60% 10.80%

Motor boats up to 7.5m in length

(if registered in a commercial register) 90% 16.20%

Craft permitted to sail

in protected waters only 100% 18%


A practical example involving a craft with a A practical example involving a craft with a length of 25 metres and having a value of length of 25 metres and having a value of

€ € 1,000,0001,000,000


Down PaymentDown Payment

• Initially the lessee is to pay the lessor half the value of the yacht.Initially the lessee is to pay the lessor half the value of the yacht.• Initial Amount due = 50% of € 1,000,000 = € 500,000Initial Amount due = 50% of € 1,000,000 = € 500,000• Amount subject to VAT on down payment VAT is payable over 30% of the Amount subject to VAT on down payment VAT is payable over 30% of the

value of the craft.value of the craft.– 30% of € 500,000 = € 150,00030% of € 500,000 = € 150,000

• VAT due = 18% of the portion liable to VATVAT due = 18% of the portion liable to VAT– 18% of € 150,000 = € 27,00018% of € 150,000 = € 27,000

• Total amount due initially: Total amount due initially: – € € 500,000 (initial amount due) + € 27,000 (VAT payable thereon)500,000 (initial amount due) + € 27,000 (VAT payable thereon)

• Total due = € 527,000Total due = € 527,000


InstalmentsInstalments

• The law requires that at least 10% profit is made through the instalments.The law requires that at least 10% profit is made through the instalments.For such purposes a monthly instalment of € 16,667 payable for 36 months and For such purposes a monthly instalment of € 16,667 payable for 36 months and totalling € 600,000 is due. totalling € 600,000 is due. Total profit would be of € 100,000 over and above the value of the craft; equal to Total profit would be of € 100,000 over and above the value of the craft; equal to 10% of the value of the craft.10% of the value of the craft.

• ““Vatable” amount on monthly instalmentsVatable” amount on monthly instalments– 30% of € 16,667 = € 5,00030% of € 16,667 = € 5,000

• VAT due on monthly instalmentsVAT due on monthly instalments– 18% of € 5,000 = € 900 monthly18% of € 5,000 = € 900 monthly

• The company is liable to pay income tax over the 10% (equal to € 100,000) profit. The company is liable to pay income tax over the 10% (equal to € 100,000) profit. Shareholders of the company who are not Maltese Citizens are taxed at 5% of the Shareholders of the company who are not Maltese Citizens are taxed at 5% of the profit (totalling € 5,000). Hence, the € 5,000 are to be added to the VAT which is paid profit (totalling € 5,000). Hence, the € 5,000 are to be added to the VAT which is paid on the whole transaction.on the whole transaction.


Purchase OptionPurchase Option

• The purchase price for the craft at the end of the lease agreement may not be less than The purchase price for the craft at the end of the lease agreement may not be less than 1% of the original value of the craft.1% of the original value of the craft.– In this case 1% of € 1,000,000 is equal to € 10,000.In this case 1% of € 1,000,000 is equal to € 10,000.

• VAT on purchase priceVAT on purchase price– 18% of € 10,000 = € 1,80018% of € 10,000 = € 1,800

• Apart from VAT, income tax liability of 5% of the purchase price in case the Apart from VAT, income tax liability of 5% of the purchase price in case the shareholders are not Maltese Citizens is also triggered off.shareholders are not Maltese Citizens is also triggered off.

• Global income tax liability if the craft is bought by the lessee Global income tax liability if the craft is bought by the lessee upon upon termination of the lease agreement (excluding VAT liability) – termination of the lease agreement (excluding VAT liability) – – 5% of the € 100,000 profit resulting from the lease agreement +5% of the € 100,000 profit resulting from the lease agreement +– 5% of the € 10,000 profit from the sale of the yacht upon termination of the lease 5% of the € 10,000 profit from the sale of the yacht upon termination of the lease

agreementagreement

Tax Liability SummaryTax Liability Summary

€66,700 Total Liability

5001,800Final Sale5,0000Lease Profit

032,400Payment (€ 900 x 36 months) Global Monthly027,000Initial Payment

Income Tax (€)VAT (€)


Yachts - ConclusionYachts - Conclusion

• The total amount of income tax and VAT paid works out at an The total amount of income tax and VAT paid works out at an average of 6.6% of the value of the craft.average of 6.6% of the value of the craft.

• Furthermore, provided all the conditions are strictly adhered to Furthermore, provided all the conditions are strictly adhered to after the sale, one may apply for a VAT paid certificate.after the sale, one may apply for a VAT paid certificate.

Malta – A Flag of Confidence, a Flag of ChoiceMalta – A Flag of Confidence, a Flag of Choice

The Malta maritime flag is the flag of a well-established, yet dynamic, The Malta maritime flag is the flag of a well-established, yet dynamic, maritime centre. The Malta international ship register completes the wide maritime centre. The Malta international ship register completes the wide range of services, which is Maritime Malta and at the same time draws its range of services, which is Maritime Malta and at the same time draws its strength from being an integral part of a truly international maritime and strength from being an integral part of a truly international maritime and

service centre.service centre.

Changes to the tax treatment of Non-Domiciles Changes to the tax treatment of Non-Domiciles in the UKin the UK

Inez Anderson, Smith & Williamson

The Key Changes:

• The counting of days in the UK for tax residence purposes

• The loss of the tax free band (£5435) if non UK income taxed on the remittance basis.

• If tax resident in the UK for 7 out of last 9 years, a levy of £30,000 p.a to qualify for remittance basis.

• Need to elect each year for remittance basis otherwise worldwide income & gains subject to tax in the UK (there are two exceptions to this)

Change in Residence Rules

• No changes to rules determining:– Residence– Ordinarily residence

• Change to basis of counting days:

Up to 6/4/08

Exclude days of arrival and

departure

From to 6/4/08

Include days when in the

UK at midnight

• Previous rules: a person who was not domiciled in the UK was taxed on their foreign source income and gains only if the income or gains were remitted to the UK.

• New Rules: now taxed on worldwide income and gains even if not remitted unless an election is made for the remittance basis to apply.

Changes to the Remittance Basis of Taxation

Exception to the New Rules

Election for remittance basis does not need to be made if:

– The individuals foreign income and gains are less than £2,000 in the year

– The individuals has no UK income; does not remit any foreign income or gains; and is either under 18 years old or tax resident in the UK for no more than 6 out of last 9 years.

Changes to the Remittance Basis of Taxation cont.

The Remittance Basis of Charge

• The charge applies to Foreign Domiciliaries who:

– Do not qualify for automatic remittance basis;– Have been resident in the UK for at least 7 out of

previous 9 tax years; and– Are over 18 at some point in the tax year.

• Charge of £30,000 will apply for each year they elect for remittance basis to apply

• If the £30,000 is remitted from overseas it will not be treated as a remittance and taxed in the UK.

Anti Avoidance Rule on Leaving the UK

• A non-domiciled individual who has been:

– UK tax resident in 4 out of 7 years preceding departure;

and

– Is non resident for less than 5 complete tax years

Any income remitted after 6 April 2008 during the period of non-residence will be treated as remitted in the year of return to the UK.

A similar rule also applies to capital gains.

Bas OpmeerBas Opmeer

28 May 2008 , Vienna28 May 2008 , Vienna

Vienna, 28 May 2008Bas Opmeer, tax partner

Personal deductions and EC Law

Starting point of discussion within the ECJ:

- Schumacker, 14 February 1995, C-279/93:- After that several cases were decided:

• Gschwind, 14 September 1999, C-391/97;• Zurstrassen, 16 May 2000, C-87/99;• De Groot, 12 December 2002, C-385/00• Gerritse, 12 June 2003, C-234/01;• Wallentin, 1 July 2004, C-169/03.

General conclusions appearing out of this cases:

a.the situations of residents and of non-residents are generally not comparable, because the income received in the territory of a State by a non-resident is in most cases only a part of his total income, which is concentrated at his place of residence, and because a non-resident’s personal ability to pay tax, determined by reference to his aggregate income and his personal and family circumstances, is easier to assess at the place where his personal and financial interests are centred, which in general is the place where he has his usual abode;

b. the fact that a Member State does not grant to a non-resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory having regard to the objective differences between the situations of residents and of non-residents, from the point of view both of the source of their income and of their personal ability to pay tax or their personal and family circumstances;

• the position is different, however, in a case where the non-resident receives no significant income in the State of his residence and obtains the major part of his taxable income from an activity performed in the State of employment, with the result that the State of his residence is not in a position to grant him the benefits resulting from the taking into account of his personal and family circumstances. In the case of a non-resident who receives the major part of his income in a Member State other than that of his residence, discrimination arises from the fact that his personal and family circumstances are taken into account neither in the State of residence nor in the State of employment;

d. The argument that the grant of the tax allowance to a non-resident would undermine the cohesion of the tax system, because there is in tax law of a member state a direct link between the taking into account of personal and family circumstances and the right to tax fully and progressively residents’ worldwide income, cannot be upheld. In such a situation the State of residence cannot take account of the taxpayer’s personal and family circumstances because there is no liability for tax there.

New developments as of 2006:Ritter-Coulais, 21 February 2006, C-152/03;Lakebrink, 18 July 2007, C-182/06;Renneberg, C-527/06 pending

Ritter-Coulais

The case:

- Appellants lived in a private dwelling in France;- Assessed in Germany for the tax year 1987 as natural persons liable to income tax on their total income;- The negative income deriving from their own house in France was not taken into account for the purposes of determining the rate for their tax liability in Germany.

Questions from the Bundesfinanzhof:

1) Is it contrary to Article 43 and Article 56 of the Treaty establishing the European Community that a natural person assessable to tax in Germany on his or her total income and in receipt of income from an employment there should be unable to deduct rental income losses arising in another Member State in the computation of taxable income in Germany?

2) If not: is it contrary to Article 43 and Article 56 of the Treaty establishing the European Community for such losses not to be taken into account for the purposes of what is known as the ‘negative tax progression clause’?

Answer from the ECJ:

Article 48 of the EEC Treaty (subsequently Article 48 of the EC Treaty and now, after amendment, Article 39 EC) must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which does not permit natural persons in receipt of income from employment in one Member State, and assessable to tax on their total income there, to have income losses relating to their own use of a private dwelling in another Member State taken into account for the purposes of determining the rate of taxation applicable to their income in the former state, whereas positive rental income relating to such a dwelling is taken into account.

Note that the ECJ did not answer the question of deductibility, but only with regard of the rate of taxation

Lakebrink The case:

- Mr and mrs Lakebrink, German nationals resident in Germany, were both employes exclusively in Luxemburg, and were jointly taxed in Luxemburg;

- They declared a negative rental income of € 26.088 in connection with two properties in Germany owned by them but not occupied by themselves;

- They wanted the rental loss to be taken into account for the purpose of determining the tax rate applicable to residents in Luxemburg.

Question from the Cour administrative:

‘Is Article 39 EC to be interpreted as precluding national rules, such as those introduced in ... Luxembourg by Article 157ter of the [LIR], under which a Community national not resident in Luxembourg who receives income of Luxembourg origin from employment, which constitutes the major part of his taxable income, cannot rely on his negative rental income relating to property situated in another Member State, in this case Germany, which he does not himself occupy, for the purposes of the determination of the tax rate applicable to his Luxembourg income?’


Article 39 EC is to be interpreted as precluding national legislation which does not entitle a Community national who is not resident in the Member State in which he receives income that constitutes the major part of his taxable income to request, for the purposes of determination of the tax rate applicable to the income so received, that negative rental income relating to property situated in another Member State which he does not himself occupy be taken into account, whilst a resident of the first State can request that such negative rental income be taken into account.

Note that this decision also is not about deductibility but applicable rate

Renneberg The case:

- Mr Renneberg is a Netherlands citizen who emigrated to Belgium in 1993;

- He owned a dwelling in Belgium financed by a mortgage from a Netherlands resident bank;

- In the years in question (1996/1997) he was a public servant in The Netherlands and derived his entire employment income from The Netherlands;

- Mr Renneberg deductive the negative income from his dwelling: difference between rental value and mortgage income from his employment income. The Netherlands tax inspector refused the deduction.

Must Articles 39 EC and 56 EC be interpreted as precluding, either individually or jointly, a situation in which a taxpayer who, in his country of residence, has (on balance) negative income from a dwelling owned and occupied by him and obtains all of his positive income, specifically work-related income, in a Member State other than that in which he resides is not permitted by that other Member State (the State of employment) to deduct the negative income from his taxed work-related income, even though the State of employment does allow its own residents to make such a deduction?

Question from the Hoge Raad:


Not yet given

Expectations:

a. Given the conclusions of the opinion of Advocate General Leger in Ritter-Coulais and Mengozzi in Lakebrink the negative income must be deductible from the employment income;

b. Netherlands Authors have the opinion that it is possible for the ECJ to decide negatively because of Marks & Spencer (ECJ, 13 December 2005, C-446/03) and Lidl Germany (ECJ 15 May 2008, C-414/06).

Remark:

This is all about the Dutch income tax rules before the tax reform 2001!!

Dutch approach: tax reform 2001

Right of option for non-resident taxpayers

opt. in for the resident regime

Tax base NL: Wages, company car 150.000

Deductible: mortgage interest

personal allowance -/- 50.000

100.000

Advantage for this tax payer: 52% x 50.000 26.000

Right of option for non-resident taxpayers (2)Split salary situation

Example 2

Taxable:

Wage, company car:

Netherlands 80.000

Germany 20.000

100.000

Deductible:

Annuities and other premiums 10.000

Personal allowance 10.000

Mortgage on owner occupied dwelling 20.000

40.000

Taxable income (box 1) 60.000

Right of option for non-resident taxpayers (3)Split salary situation (2)

Non resident:

Taxable income in the Netherlands:

Wage, company car 80.000

Annuities and other premiums -/- 10.000

Taxable income 70.000

Income tax to be paid 29.645

Right of option for non-resident taxpayers (4)Split salary situation (3)

Opting non-resident:Taxable income 60.000

Income tax 24.425Tax relief double taxation

(“Besluit voorkoming dubbele belasting 2001”)20.000 (German income)100.000 (Total income) x 24.425 4.885

19.540

Questions:

- Are The Netherlands too generous;

- How do the other EU member states deal with personal deductions for non-residents;

- Tax planning opportunities!?

- Analyses within Nexia Europe starting with a short questionnaire

Mr. Bas OpmeerTax partner

T: +31 418 579 679F: +31 418 579 688M: +31 653 80 53 23

E: [email protected]

VAT in 2010VAT in 2010

John Voyez, Smith & Williamson UKJohn Voyez, Smith & Williamson UK

VAT in 2010

• There has been much discussion concerning the current VAT system and the “right” framework for the future.

• Main areas of debate have been on cross border supplies of services and intangible property.

• However, fraud involves the movement of goods, and is of continuing concern eg carousel fraud.

• Need for a framework which is neutral, efficient, flexible, certain and simple, and also “fits” with wider international trade beyond the EU.

• One that avoids double or no taxation – note the different interpretation of transactions by EU member states eg. leasing.

• Intention is to move to destination principle by 2010 for B2B transactions with certain exceptions ie. the reverse charge will apply based on where the customer is “established”.

• For B2C services the rules will not change with the exception of certain services (eg telecommunications, broadcasting and electronic services) which will move to the destination principle by 2015.

• There may be some exceptions eg. cross border hire of means of transport, cultural activities, exhibitions etc.

VAT in 2010

• The Confederation Fiscale Europeenne have identified the differing treatment of royalties as a source of possible double taxation that needs to be resolved eg. taxed once on the import valuation of goods, and twice, if treated as an independent service to be invoiced for and taxed under the destination principle.

VAT in 2010

• Another problem area relates to different interpretation of “legal entities” eg should branch to branch cross border be ignored or treated as two separate legal entities? [Ministero dell' Economin e dele Finanze v FCE Bank plc Case C-210/04]

• Cash flow advantage to claiming service received by non resident branch rather than local branch.

• Will we need tie break rules?

VAT in 2010

Other proposed changes;

• Monthly EC Sales Listings to speed up availability of information to combat fraud.

• Sales Listings also to include details for cross border services.

• Tax point for reverse charge services to become the date of completion of the services.

• Likely burden on business? More restrictive time limits.

• Monthly VAT returns subject to €200,000 de minimis limit for cross border supplies.

VAT in 2010

John VoyezJohn VoyezTel: 00 44 (0)20 7131 4285Tel: 00 44 (0)20 7131 4285

Email: Email: [email protected]

mailto:[email protected]

•Reduction capital duty from 1% to 0,5%•Increase complementary investment to 12%•80% exemption for intellectual property•Super-reduced tax rate of 3% for radio transmission/TV broadcasting

2008 LUXEMBOURG TAX UPDATE

TAX EXEMPTION for Intellectual Property

•Applicable forPatentsTrade marks (also domain names)DesignsModelsSoftware copyrights

•Market value•Small & Medium sized companies

Main conditions• Calculation• Condition

IP has been created/acquired after 31/12/2007Expenses connected with IP must be recorded as an asset

in the balance sheet for the first book year.The IP must not have been acquired from a related company

• Questions

Vienna, May 28th 2008, Mrs. Lutgard Laget

Czech Republic

2008 tax update

I. Tax Rates

• Corporate Income Tax – 21 % as of taxable period started in 2009 – 20 %as of taxable period started in 2010 – 19 %

• Personal Income Tax – flat rate 15 % as of 2009 – 12.5 %

• Value Added Tax – lower tax rate 9 %(until end of 2007 – 5 %)

II. Corporate Income Tax

• Thin capitalisation rules tightened

• Binding rulings extended

• Financial Leasing

• Taxation of outstanding obligations

• Provisions to receivables

• Passenger cars

• Liquidation of inventories

III. Personal Income Tax

• Super-gross wage

• Tax credits increased

• Joint taxation of spouses cancelled

• Limitation of pension and life insurance

contributions

• Exemption from tax on gains from the sale of

securities (6 months / 5 years)

IV. Value Added Tax

1. Group registration

2. Social housing

3. Binding ruling – tax rate

4. Energy taxes (on electricity, natural gas

and solid fuels)

V. Reform of the Czech tax system

1. New Tax Administration Code

2. Cancelation of inheritance and gift tax

3. Consolidation of collection of taxes, duties

and social and health security contributions

4. Unification of tax base – elimination of

exceptions

May 28, 2008 CFH Cordes + Partner

Tax-Update GermanyTax-Update Germany

European Tax Group Meeting

May 28, 2008 in Vienna

CFH Cordes + Partner CFH Cordes + Partner Wirtschaftsprüfer Steuerberater Rechtsanwalt Wirtschaftsprüfer Steuerberater Rechtsanwalt

Hamburg/GermanyHamburg/Germany

[email protected]@nexia.de


OverviewOverview

• Reform of Inheritance Tax• Reform of Accounting Rules

(„BilMoG“)• Reform of Law of

Private limited company („GmbH“)• Law regarding fiscal offences• § 15 AStG• Trade Tax 2008


Reform of Inheritance Reform of Inheritance Tax (1)Tax (1)

• Enlargement of basis for inheritance tax: higher evaluation of enterprises and real estate based on market values

• Increase of tax exempt amounts for husbands and wives, for children and for registered same-gender-couples

• Consequence: especially higher taxation of non-family-members


Reform of Inheritance Reform of Inheritance Tax (2)Tax (2)

• Tax exemption of 85% if enterprise is continued for 15 years after transfer

• Reform is criticised• New working-group installed• Entry to force was planned until June 1 or July 1,

2008

probably will be postponed


Reform of Accounting Reform of Accounting Rules (”BilMoG”)Rules (”BilMoG”)

• Accounting rules in commercial law planned to be adapted to international accounting standards

• No obligation for smaller enterprises to fulfill accounting standards (profit max. 50.000 EUR and turnover max. 500.000 EUR)

• Restriction of options in accounting• Balance-sheet HGB still relevant for distribution of

company profits• No entry into force yet


Reform of Law of Private Reform of Law of Private limited company (”GmbH”)limited company (”GmbH”)

• German private limited company („GmbH“) intended to be more competitive to Limited

• Reduction of minimum shareholders equity from 25.000 EUR to 10.000 EUR; “Unternehmergesellschaft” 1 EUR

• Change of system of “Kapitalersatz” – today: loans granted form shareholder to company in the crisis are

considered as equity and cannot be paid back– reform: subordination of those loans, no declaration necessary

• Possibility of cash-pooling(under current law problem of additional payment of equity)

• No entry into force yet


Law regarding fiscal Law regarding fiscal offencesoffences

• Extension of prescription period for law regarding fiscal offences planned in Annual Tax Law 2009

• Offices and homes searched by tax authorities due to DVD containing data about fiscal offences in Liechtenstein

• Klaus Zumwinkel, CEO of Deutsche Post AG most famous “victim” of the DVD so far

• Tax authorities are supposed to distribute data from the DVD to other countries, as Finland, Sweden, Norway, The Netherlands

• According to press-information, informant gave further information to UK, USA, Canada, Australia, France


§ 15 AStG§ 15 AStG

• § 15 AStG attributing income of a foreign trust to the natural persons behind this trust

• This rule is violating EU-Law; now accepted by Ministry of Finance

• If family trust settled in EU and trust-assets are transferred to the trust irrevocably, the income of the trust is not attributed to the natural persons behind

• Not relevant for cases of definitive taxation


Trade Tax 2008 (1)Trade Tax 2008 (1)

• Due to Business Tax Reform 2008, trade tax becomes more important to investments in enterprises in Germany

• Tax-basis enlarged - especially payments for interests, lease, license are included

• Tax-rate reduced – 3,5% on tax-basis instead of 5% until 2007

• From 2008 on, trade tax not deductible from profit


Trade Tax 2008 (2)Trade Tax 2008 (2)

• System of trade tax:– Tax-basis (generally earnings under corporate law or

income law + additions - reductions)– 3,5% on this tax-basis forms „Steuermessbetrag“– Local percentage between 200% and 470% on this

„Steuermessbetrag“ forms trade tax– e.g. based on Local percentage of 400%:

trade tax 14%

• Trade tax has to be added to corporate tax / income tax to calculate total tax burden of enterprise


FinallyFinally......

Thank you for your attention ...

[email protected]@cfh-hamburg.de

[email protected]@cfh-hamburg.de

Documents

Nexia European Tax Group Meeting 28 May 2008, Vienna