Germany: multinationals faced increasing tax compliance obligations in 2017, uncertainty lies ahead

by Ninja-Antonia Reggelin

The German government actively addressed multinational firm tax avoidance and tax evasion during the first half of 2017, implementing its version of the OECD/G20 base erosion profit shifting (BEPS) plan agenda and reacting to the Panama Papers leaks.

These efforts came to a complete stop, though, with the parliamentary summer break in the wake of the September 24 federal elections.

The outlook for 2018 remains uncertain for multinationals operating in Germany, as efforts to form new federal government have thus far failed. Other forces, such EU tax initiatives, US tax reform, and public pressures may drive the tax agenda going forward.

Harmful tax practices and licensing of rights

The year 2017 saw the enactment of the controversial “royalties barrier“ (Lizenzschranke), which adds new article 4j “Expenses for Assignment of Rights” to the income tax act (EStG).

Under this provision, a deduction is denied for a royalty payment

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