In a first reaction to the Panama Papers the German Minister of Finance came with a 10 point Action Plan in April 2016 (For more information see our article from April 12, 2016). On September 22, 2016 the German Ministry of Finance published proposals aimed at combating tax havens and letterbox firms.

 

In a press release issued by the German Ministry of Finance on September 22, 2016 it is stated that German Federal Ministry of Finance came to an agreement with the states on tightening tax legislation. According to the Ministry the departmental coordination of the relating legislative proposal is scheduled to begin in October 2016.

 

The measures

The aim is to arrange that the authorities receive comprehensive information regarding business relations between German taxpayers and shell companies in tax havens and to equip the authorities with new investigative powers in order to enable them to achieve this. Until now the authorities are subjected to tight restrictions to get hold of such information. The leader of the tax department of the Federal Ministry of Finance and the ministries of the states therefore suggest changing the tax code in the following three areas:

·   Extending the cooperation obligations for taxpayers

·   Reporting requirement for banks

·   Expanding the investigative powers of the tax authorities

 

Extending the cooperation obligations for taxpayers

Nowadays tax payers are obliged to inform the tax authorities when they obtain an interest exceeding a certain threshold in a foreign company which capital is divided in shares.

 

It is now proposed to expand this information obligation. Under the proposal taxpayers will not only be obliged to inform the tax authorities regarding formal ownership, but also when they actually exercise dominant influence over the foreign entity. The information obligation will also apply to situations in which the taxpayer does not generate any German income via its participation/influence.

 

Furthermore it is proposed to increase the fines when the taxpayer does not meet its information obligation.

 

Reporting requirement for banks

A new reporting requirement for banks is to be introduced. The credit institutions will have to inform the tax authorities which participations in letterbox firms and which economic ties with letterbox firms they have facilitated.

 

A considerable fine is to be introduced that will apply when the reporting requirement is breached. Furthermore the bank can be held liable for any (tax) damage incurred.

 

Expanding the investigative powers of the tax authorities

·   The so-called bank secrecy for taxes of § 30a der Abgabenordnung (§ 30a of the Tax Code) is to be repealed.

·   In addition, the automated account access procedure will be extended to the investigation into relationships with shell companies.

·   The existing jurisprudence regarding the possibility of collective requests for information should be incorporated into the law.

·   The banks will be obliged to document the tax identification number of any accountholder and/or beneficial owner to an account.

·   Furthermore tax evasion by covert investments is to be included in the catalogue of very serious fraud. This would mean that the statute of limitations for criminal prosecution for such cases will be ten years.

 

Click here to be forwarded to a press release issued by the German Ministry of Finance on September 22, 2016 in this respect. (The press release is only available in the German language)

 

 

Copyright – internationaltaxplaza.info

 

  

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