The German Ministry of Finance recently changed their rules re: maintenance of books and records for tax (including customs) purposes. The GoBD compliance provisions are especially important in acquiring businesses with German locations, digital technology, changing systems, moving/dissolving German entities and reviewing current documentation rules for multinationals operating in Germany. Upon audit, German tax authorities will ensure this compliance is verified.
These rules are similar to other EU rules for maintaining records in the country, and should always be a diligence item for M&A, ERP system conversions, etc.
The German Federal Minister of Finance has published a draft law, implementing the EU anti-tax avoidance directive. However, the legislation is very far-reaching! Although the provisions are still draft, there are 2020 effective dates.
Eliminates current TP hierarchy for methods
Looks at conduct, vs. contracts
Codifies function and risk analysis
Best method rule
Legal definition of “intangibles”
Intangible price-adjustment clause
Addresses transfer of functions valuation
Deductibility of German interest expense
Expands related party definition
Reduces turnover amount to prepare a TP Master File
EY’s Global Tax Alert provides recent developments for BEPS by Australia, Austria, Belgium, EU, Germany, Iceland, India, Niger, and Romania.
Australia: Local File is OECD +, going beyond OECD’s recommendations, including transactional detail. This development is proving that global consistency is a rapidly fading ideal, as countries legislate what they think benefits them the most. Unfortunately, this adds to the cost, time and complexity of preparing global reports.
Austria: Transfer pricing documentation draft regulations follows the OECD.
Economic and Financial Affairs Council of the European Union (ECOFIN): EU Member States Finance Ministers, envision adopting the Anti-Tax Avoidance Directive on 17 June 2016, subject to amendments. Legal agreement was also reached on adoption of the Directive on the exchange of non-public country-by-country tax information. Conclusions were also adopted on the European Commission communication on an external tax strategy and tax treaty abuse measures.
Germany: Transfer pricing technical draft introducing transfer pricing documentation standards as recommended by the OECD. Master File and Local File documentation requirements introduced.
India: A 6% Equalization Levy (EL) to apply on gross payments for certain digital services received by a nonresident.
Niger: Thin capitalisation rules introduced.
Romania: To become a BEPS Associate and participate in the OECD’s framework.
As the above developments note, BEPS guidelines and intent remains very strong in the global community, with many changes already made and many more to come.