Germany Adopts Law On CbC Reporting And Tax Rulings

The German Federal Cabinet has adopted a bill to implement key aspects of the OECD’s base erosion and profit shifting (BEPS) recommendations and the European Union’s administrative cooperation directive.

The Act Concerning the Implementation of Changes to the EU Administrative Cooperation Directive and of Additional Measures against Base Erosion and Profit Shifting was published by the Finance Ministry on June 1, 2016, and approved by the Cabinet on July 13. The legislation will formally introduce a transfer pricing country-by-country reporting regime in Germany as per the recommendations of the OECD in its final report on Action 13 of the BEPS project.

The CbC reporting requirements will apply to ultimate parent entities with annual revenues of at least EUR750m (USD830m), and must be filed for tax years ending after December 31, 2015, except for entities reporting under the “secondary mechanism,” which applies for tax years ending after December 31, 2016. Under the secondary mechanism, when the ultimate parent entity is located in a jurisdiction which does not require CbC reporting, another member of the group in a jurisdiction with CbC reporting rules can be designated to act as the parent company in this capacity.

The bill also transposes into German law the mechanism to allow Germany to exchange CbC reports with foreign tax authorities under the Multilateral Competent Authority Agreement for the automatic exchange of CbC reports, which Germany signed on January 27, 2016.

Another important feature of the bill is a measure implementing the December 8, 2015, amendments to the EU directive on administrative cooperation in the field of taxation, which requires member states to automatically exchange information on advanced tax rulings and advanced pricing agreements from January 1, 2017.

Commenting on the measures, Finance Minister Wolfgang Schäuble said: “We go ahead in implementing the BEPS recommendations. With the rules on tax rulings and the country-by-country reporting, we increase the transparency of taxation of international groups and strengthen cooperation between tax administrations in the EU. Our goal is… fair taxation of corporations.”