The Federal Fiscal Court (BFH) has made a decision with significant effects on the financing of foreign subsidiaries by domestic shareholders, in practice with regard to profit-reducing write-offs.
If the profit-reducing write-offs of an unsecured group loan is neutralized, this income adjustment is not blocked according to the OECD-Model Convention, contrary to previous case law. This was decided by the Federal Fiscal Court as part of its ruling of February 27, 2019 (Ref. I R 73/16).
In the case negotiated, a German based limited liability company (GmbH) maintained a non-secured clearing account for a Belgian subsidiary. After the Belgian subsidiary faced financial difficulties, the GmbH waived its claim from the clearing account and wrote it off in its balance sheet. However, the tax office reversed the reduction of profit.
Clearing of profit-reducing write-offs previously not allowed
The Federal Fiscal Court has also so far assumed that the OECD-Model Convention was limited to price adjustments for situations subject to a double taxation agreement. , whereas the reversal of the profit-reducing write-off of a loan claim or a current-value depreciation are excluded.
This case law has now been amended: it was no longer possible to ascertain whether the loan in question was in fact a loan to be recognised for tax purposes or equity capital of the Belgian subsidiary. This could, however, remains to be seen since the profit-reducing write-off by the German GmbH had to be corrected in any event.
The court also announced that it intends to specify the new principles in the near future.
(BFH / STB Web)
Since 15 May 2019, a new instrument is used by the EU to detect VAT fraud more quickly. The Transaction Network Analysis Tool (TNA) provides the tax authorities fast and uncomplicated access to information on cross-border sales.
Member States lose up to € 50 billion each year in tax from VAT fraud. According to the European Commission, it is important that all member states have the tools they need to act as quickly and efficiently as possible. The new tool should enable member states to exchange and process data quickly and jointly and thus detect suspicious transactions earlier.
The TNA, which was developed in close cooperation between the member states and the Commission, should also allow more intensive cooperation within the EU anti-fraud expert network ("Eurofisc") on joint data analysis. The TNA will encourage cooperation and exchange of information between national tax officials, so that Eurofisc officials will now be able to cross-check information with criminal records, databases and information from Europol and the EU Anti-Fraud Office OLAF and coordinate cross-border investigations.
(EU-Kommiss. / STB Web)
The European Court of Justice (ECJ) has ruled that member states are required to set up a system to measure daily working time.
A working time recording system would be a particularly effective way for employees to easily obtain objective and reliable data on working time actually performed and to determine whether the maximum weekly working time, including overtime, and daily and weekly recovery periods have been considered.
Such a system would make it easier, both, for workers to prove that their rights have not been infringed and for the competent authorities and national courts to monitor compliance with those rights. Otherwise, it would be extremely difficult or even practically impossible for employees to enforce their rights, according to the ECJ ruling as of May 14, 2019 (C-55/18).
It is for the member states to determine the practical arrangements for implementing such a system, in particular the form to be adopted, taking into account, where appropriate, the specific nature of the activity or characteristics, even the size of certain undertakings.
The lawsuit was brought by a Spanish trade union. According to information provided by the ECJ, 53.7% of the overtime worked in Spain is not covered.
(EuGH / STB Web)
The Finance Court (FG) in Düsseldorf has ruled that the customs administration may request the personal tax identification number and the tax office responsible for personal taxation of the head of the customs department at the companies concerned.
The Union Customs Code, which came into force on May 1, 2016, adjusted the requirements for customs permits. The Customs Administration is carrying out a revaluation for all permanent authorisations issued before May 1, 2016. This involves checking whether the authorisations granted comply with the authorisation criteria of the Union Customs Code.
Request for disclosure of personal data
The applicant is the holder of customs authorisations. For the purposes of the revaluation, the defendant main custom office sent the applicant the questionnaire on self-assessment Part I in April 2017. The plaintiff was requested to disclose personal data of its employees and members of its supervisory board. Among other things, the personal tax identification numbers and the tax offices responsible for the personal taxation of these employees should be disclosed. The authority pointed out that if its questions were not answered, it would revoke the customs authorisations.
Preliminary ruling of the European Court of Justice
By its action, the applicant requested a declaration that it was not obliged to answer the questions. After having obtained a preliminary ruling from the European Court of Justice, the Finance Court in Düsseldorf largely allowed the lawsuit (judgment of February 6, 2019; file reference 4 K 1404/17 Z) .
The plaintiff was unsuccessful in opposing the disclosure of the personal data of the head of her customs department. It had to disclose this data to the customs administration. However, the court pointed out that the customs authority was not allowed to collect sensitive information about the personal situation of the person concerned, such as his marital status, religious affiliation or income. In addition, the customs administration has to inform the respective person about the collection of the personal data.
No obligation to disclose information for other employees and members of their supervisory board
The members of advisory boards and supervisory boards, managing directors, head of department, insofar as they are not responsible for customs matters of the plaintiff, accounting manager and customs clerks, do not have a duty of disclosure their data on the part of the plaintiff. As far as the inquiry of the customs authority concerns these persons, the plaintiff does not have to provide any information.
The decision is legally binding.
(FG Düsseldorf / STB Web)
The Federal Fiscal Court (BFH) has doubts as to which details are required to designate the "invoice number" in an input tax refund application from a taxpayer resident in another member state and asked the European Court of Justice (ECJ) for clarification in this respect.
In the case, the refund application of a freight forwarder domiciled in Austria was submitted electronically to the Federal Central Tax Office (BZSt) via the portal set up by the Austrian tax authorities. The request was based on invoices for the supply of fuels from which the company claims input tax deduction. In the official annex to the application, the invoice column "document number" does not contain the invoice number shown in the respective invoice, but a further reference number shown in the invoice and recorded in the plaintiff's accounts. The BZSt rejected the input tax refund because the application did not comply with the statutory requirements.
Additional reference number sufficient?
In its order for reference to the ECJ of February 13, 2019 (reference no. XI R 13/17), the Federal Fiscal Court argues that the indication of the reference number enables the invoices to be clearly allocated. The application received by the BZSt in due time was at best incorrect, at any rate not incomplete and thus not invalid. Insofar as the plaintiff has assigned the reference numbers to the respective invoice number after expiry of the application deadline, this is a possible addition to the information irrespective of the application deadline.
The reference for a preliminary ruling from the BFH is intended in particular to clarify whether it is also sufficient to indicate the reference number of an invoice which is shown as an additional classification criterion in addition to the invoice number.
(BFH / STB Web)
The Federal Fiscal Court (BFH) has ruled that a taxpayer's obligation to keep accounts based on foreign law must also be assessed as a duty to cooperate in (domestic) tax proceeding.
According to the provision of § 140 of the German Tax Code (Abgabenordnung - AO), recording and accounting obligations from other than tax laws must also be fulfilled for taxation purposes. In particular, this "transforms" the accounting obligations under the German Commercial Code into tax cooperation obligations. This relieves the legislator, who does not have to create specific accounting obligations. Furthermore, the advantage for the taxpayer is that he can also use the accounting documents to be prepared anyway for tax purposes. The BFH has now decided that also any foreign bookkeeping obligations are transformed by § 140 AO into tax cooperation obligations.
No additional bookkeeping required under German tax law
The case decided by the Federal Court of Finance by judgment of November 14, 2018 (reference no. I R 81/16) concerns a Liechtenstein stock corporation with domestic rental income, which is subject to accounting obligations under Liechtenstein law. The tax office wanted to obligate the company to keep accounts under German tax law as well. The BFH decided that such an obligation is not necessary because the company is already obliged to keep accounts for tax purposes according to § 140 AO.
(BFH / STB Web)
The Federal Fiscal Court (BFH) has decided that the managing director of a corporation can be a permanent representative. This leads to a limited corporate income tax liability of the foreign company, even if it does not maintain a permanent establishment in Germany.
The case decided by the BFH concerns a Luxembourg public limited company whose managing director regularly resided in Germany in order to initiate, conclude and settle gold transactions for it. In the tax office’s opinion, the company limited by shares was subject to limited corporate tax because the managing director was the company's permanent representative within the meaning of the German Tax Code (Abgabenordnung - AO). However, the Finance Court argued differently and allowed the lawsuit against the corporate tax assessment notice.
Permanent representative of the company within the meaning of the German Tax Code
The BFH annulled the decision of the fiscal court by judgment of October 23, 2018 (file no. I R 54/16). According to § 13 AO, a permanent representative is a person who sustainably conducts the business of a company and is subject to its instructions. Since the regulation requires a representative and a company in addition, it is controversial whether the managing director, as an institution of the corporation, can meet these requirements. According to German civil law, the company acts itself when its institutions become active.
BFH clarifies controversial legal issue
The BFH has now decided the dispute. According to the purpose of the law and its wording, persons who are to be regarded as institutions of a corporation in civil law may in principle also be permanent representatives in tax law. For the foreign corporation, which has neither its registered office nor its management in Germany, this results in a limited corporate tax liability without the need for a domestic permanent establishment.
(BFH / STB Web)
The higher social court (Landessozialgericht -LSG) Nordrhein-Westfalen has confirmed a judgment of the Social Court Duisburg concerning the case of a so-called genuine cross-border commuter and decided in favour of the plaintiff.
The plaintiff has been working in the Netherlands for years, but returns daily to his German place of residence. Most recently, he received Dutch unemployment benefits from April 2014 to May 2015. Between June 2015 and November 2016, he was again employed in the Netherlands subject to compulsory insurance. His subsequent application for unemployment benefits in Germany was rejected. Although the plaintiff fulfilled the required qualifying period, the duration of the Dutch unemployment benefit must be deducted from the qualifying period so that no entitlement would arise.
Examination of the qualifying period
Now, also the LSG has contradicted this with the judgement of March 13, 2019 (reference no. L 9 AL 144/18). If a real cross-border commuter decides to file an application in Germany, he must check whether he has fulfilled the qualifying period within the framework period. The framework period always finds its limit at the end of an earlier framework period. It could not make any difference whether this had been governed by German or Dutch law.
Earlier receipt of benefits in the Netherlands not to be taken into account
Contrary to the opinion of the authority, the periods of employment which led to the entitlement to Dutch unemployment benefit do not have to be taken into account again. Only the periods of employment performed in the Netherlands after entitlement to Dutch unemployment benefits were to be taken into account for entitlement under German law.
Nor does that infringe the prohibition in the European Commission Regulation on the coordination of social security schemes on the overlapping of a claim for several benefits of the same kind from the same period of compulsory insurance, since the unemployment benefit granted and the unemployment benefit sought are benefits of the same kind but are not based on the same period of compulsory insurance.
The LSG allowed the revision.
(LSG NRW / STB Web)
The Indian Union Budget 2019 of NDA 2.0 was tabled yesterday i.e. 5th of July 2019 in the Parliament by Finance Minister, Nirmala Sitharaman. The Budget has lived up-to to the expectations on boosting the Indian economy and laying the foundation for a 5 trillion USD economy.
You can read more about that here.
German foreign investment, especially direct investment, is apparently better than its reputation. This is the result of a recent report from IfW Kiel for the Federal Ministry of Finance.
Germany repeatedly faces the accusation that the high current account surplus is being exacerbated because investments are made abroad instead of domestically, even though foreign investments would only generate insufficient interest. However, the report shows that capital flows to and from Germany since reunification have met return criteria.
The researchers compared the return on German investment abroad with the return on foreign investment in Germany. In macroeconomic terms, there is a tendency for yield differentials and the direction of net capital flows to converge. In direct investment, the yield advantage of foreign investments since the 2000s is just under 2 percent.
All in all, the researchers continue to expect margins on foreign investment in the medium term and correspondingly continued net capital exports from Germany. The related shift in purchasing power to the rest of the world maintains the financing of German current account surpluses, which should therefore initially persist, according to the researchers. "If companies and other investors invest in those countries where the higher returns are expected, this will increase their gross national income and thus their consumption potential both in Germany and in the rest of the world," says Stefan Kooths, head of the IfW Forecasting Center.
About the report
Direct investment abroad - effects on the German current account and spillovers in the recipient countries
(IfW / STB Web)
Read the article here in German.
What proportion of the salary of a foreign professional driver is tax-free in Germany? The Dusseldorf Finance Court has decided: Compensation for days on which drivers travel in both Germany and in another state, must be split.
A Dutch professional driver residing in Germany was employed by a company based in the Netherlands. On his tours he drove through Germany and the Netherlands. In his view, therefore, Germany was only allowed to tax part of his income when traveling exclusively in Germany. The remainder of his income had already been taxed in the Netherlands.
The tax office saw that differently. Also the Dusseldorf Finance Court with judgment of 13.11.2018 (Az 10 K 2203/16 E) contradicted. According to the applicable double taxation agreement, Germany is entitled to the right of taxation to the extent that the work for which the claimant has received income was not exercised in the Netherlands. For a professional driver, the vehicle is the place of work. The remuneration for the days on which the applicant traveled in both the Netherlands and Germany and / or in a third country should be split.
Contrary to the administrative view, however, this division does not necessarily have to be made in half, the court continued. A division could be made on the basis of the hours worked in each state.
(Dusseldorf Finance Court / STB Web)
Read the article here in German.
The Statistical Office of the EU (Eurostat) has examined EU-wide motives and difficulties of self-employment. For more than 1 in 5 self-employed people, the opportunity to start a business was the key to this. Around 30 percent of the self-employed said they had no difficulty in their work.
In 2017, there were more than 228 million workers in the EU, of which around 33 million were self-employed. The self-employed in the EU gave several reasons for their current self-employment: favorable opportunity (23 percent), takeover of the family business (16 percent), usual practice in the field (15 percent), flexible working hours (11 percent), no employment as an employee found (11 percent) and self-employed at the request of the former employer (2 percent).
Mostly for women flexible working hours are decisive
There is a slight difference between men and women in the EU in terms of self-employment. More women than men followed the usual practice (16 percent of women versus 14 percent of self-employed men) and for more women than men (14 percent versus 10 percent) flexible working hours were crucial.
High administrative burden one of the main difficulties
The main difficulties identified by the self-employed were a high administrative burden (13 percent) and times without customers, orders or projects (12 percent), late payments or default (12 percent), periods of financial shortages (9 percent), lack of influence on pricing (8 percent) and lack of income in case of illness (8 percent). Nearly a third of respondents said they had no difficulty (28 percent).
In 2017, 77 percent of the self-employed in the EU had two or more clients, none of whom were major customers, 18 percent of the self-employed in the EU depended on one main customer and 4 percent had no clients in the past 12 months.
These selected results, published by Eurostat, the statistical office of the European Union, come from a special data collection that has been taken from the 2017 European Commission's ad hoc module on self-employment and is presented in a "Statistics Explained" article.
(Eurostat / STB Web)
Read the article here in German.
New EU rules aim to make insolvency proceedings more efficient and give honest entrepreneurs a second chance. In the future, companies being in financial difficulties can be restructured earlier so that bankruptcies and layoffs are avoided as much as possible.
This was agreed by negotiators of the European Parliament and the Member States on December 19, 2018. The common EU standards for more efficient insolvency procedures should create more legal certainty for investors and EU-wide companies.
At present, too many economically viable companies are in financial difficulties, rather than being restructured early; and too few entrepreneurs got a second chance, according to the European Commission.
Three key elements
The directive / guidelines proposed by the Commission focuses on three key elements: common standards for preventive restructuring, rules for giving a second chance to entrepreneurs and targeted measures to increase the efficiency of insolvency, restructuring and debt clearance procedures in all Member States.
The directive still has to be formally adopted by the European Parliament and the Council. After final adoption, the Directive will be published in the Official Journal of the EU and will enter into force 20 days later.
(european commission/ STB Web)
Read the article in here German.
"Hard Brexit" - "Soft Brexit"
On 15th January 2019 the British House of Commons voted by a large majority against the withdrawal agreement negotiated between the EU and the United Kingdom of Great Britain and Northern Ireland (United Kingdom). Unless the British government completely withdraws from the withdrawal (the ECJ had built a golden bridge for this in December 2018) or postpones it with the agreement of the other EU member states, the country will leave the EU with a "hard Brexit" at the end of 29 March 2019. The following is an overview of the consequences of the Brexit in the area of corporate and tax law without claiming to be exhaustive.
In the case of a "hard Brexit", the United Kingdom will be a third country in relation to the EU from 30 March 2019 and the EU rules will no longer apply. This has far-reaching consequences for individuals and businesses.
Company law consequences for "German limited" companies
Companies incorporated under the legal form of the Private Limited Company under British law, or Limited for short, and whose administrative head office is in Germany, are no longer recognised as a company limited by shares in Germany after Brexit. The loss of legal capacity also threatens the loss of the limitation of liability. Such "German limited companies" will in future be treated as general partnerships (OHG), civil partnerships (GbR) or - in the case of one-man companies - as individuals or sole traders. In an emergency, this can result in the personal and unlimited liability of the shareholders with their private assets for (old) debts of the company.
This legal consequence can only be avoided by active action on the part of the shareholders prior to the occurrence of Brexit, e.g. by conversion or contribution to a GmbH. To facilitate this, the Fourth Act to Amend the Transformation Act (BGBl. I 2018, p. 2672) was passed. It entered into force on 1 January 2019.
Tax consequences of Brexit
There are a number of provisions in income tax law that are linked to residency in the EU and will therefore no longer be applicable in the relationship between Germany and the United Kingdom as of 30 March 2019. These include, but are not limited to
Income tax/corporation tax/trade tax
Withholding tax retention
Transformation tax law
Foreign tax law
Tax consequences in sales tax law
The common EU VAT system is no longer applicable after a "hard brexit". This has far-reaching implications for trade in goods and services. The following regulations should be emphasised:
Legal measures in preparation for a "hard Brexit"
The Federal Government has now enacted the Act on Tax Accompanying Measures for the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (Brexit Tax Accompanying Act), which is intended to prevent Brexit alone from triggering detrimental legal consequences for taxpayers, even though all significant tax-relevant acts have already been carried out prior to Brexit.
The Bundestag passed the Brexit Tax Accompanying Act on 21 February 2019. The approval of the Bundesrat is scheduled for March 15, 2019. In detail, this concerns the following regulations for the prevention of the
In addition, it should be made clear by law that Brexit alone does not trigger the legal consequence of Section 12 (3) KStG or Section 6 (5) sentence 4 AStG. Furthermore, this ensures that a subsequent transfer of the registered office or removal after Brexit from the United Kingdom to another third country leads to taxation or revocation of the deferment.
In the case of a "hard Brexit", the Federal Government has also initiated transitional social law regulations. Among other things, this is intended to regulate the crediting of insurance periods and the continued validity of the insurance status in statutory health, long-term care and pension insurance.
Should a withdrawal agreement between the United Kingdom and the EU be concluded ("soft Brexit"), the Brexit Transitional Act will provide further relief. The UK would then remain a member of the EU for a transitional period until 31 December 2020 in federal law, including company and tax law. The Brexit Transitional Act was passed in the Bundestag on 17 January 2019 (BT-Drs. 19/7087). The Federal Council approved the Act on 15 February 2019 (Bundesrat-Drs. 28/19).
As things stand at present, the Brexit Tax Accompanying Act would not take effect until 1 January 2021. Transitional regulations under social law would probably not be necessary.
With the aforementioned catch-all measures, only part of the legal consequences of Brexit can be mitigated. Due to the many individual regulations that have been incorporated into German law over the past years and decades, prudence is required in relevant (tax) legal relations with the United Kingdom.
*Source Steuerberaterkammer Hessen
For companies and freelancer
No business trip or any other foreign employment within the EU, EEA or Switzerland without an A1-certificate
Since enacting the regulation (EG) 883/2004 on May 1, 2010, employers are required to inform the responsible insurance institution about every single foreign assignment and to consider social-security-related specifics. This means that any professional cross-border activity within the European Union (EU)/European Economic Area (EEA) and to Switzerland requires an individual application for an assignment certificate (A1-certificate) according to the legal framework.
Protection against the obligation to pay double contribution obligations
When assigning employees abroad, the A1-certificate is an official document proving that the employee belongs to only one social security system and determines that only one legislation is applicable (generally the one of the home country). The A1-certificate intends to avoid the obligation to pay double contributions or short-term and possibly repeated changes between the social security systems of different countries as well as time-consuming (de)registration processes.
The insurance coverage remains generally effective, if a German employer sends an employee from Germany to another country to perform work there on behalf of the employer. However, insurance coverage is normally not granted for employees working abroad for a foreign company or who are engaged by a legally independent subsidiary. In these cases, the insurance coverage complies with the legislation of the foreign country.
Validity of the A1-certificate for foreign assignments of up to a maximum of 24 months
The validity of the A1-certificate comprises a period of up to two years. The duration of the assignment can be limited through the assignment agreement or in advance due to the nature of the employment. Therefore, an assignment does not only exist in cases where the employee is deployed abroad for one or two years. Even for one-day business trips, short meetings or conferences abroad, an A1-certificate needs to be carried.
For assignments of more than 24 months, a certificate of exemption (special agreement) is required. This special agreement is available on the homepage of the DVKA (Deutsche Verbindungsstelle Krankenversicherung Ausland, www.dvka.de/), an institution, which is taking care of (health) insurances abroad.
The A1-certificate is provided for only one concrete sending country
If employees usually perform their work in several member states and reside in Germany, the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband, DVKA) determines the responsible EU-State, in which social security contributions have to be paid.
Corresponding applications can be found on the homepage of DVKA
Electronical application and certification process as of January 1, 2019 As of January 1, 2019, the electronic application and certification process A1 is binding for the employer and participating organization(s). The applications for A1-certificates as well as certificates of exemption must be electronically submitted to the responsible institution (health insurance, pension insurance or DVKA, please see below) via data transmission from a system-tested program (e. g. payroll accounting system or a payroll program) or, alternatively, by a fill-in assistance such as sv.net (https://standard.gkvnet-ag.de/svnet/).
Only in justified individual cases, a paper-based application is still permissible until June 30, 2019 within the framework of a transitional regulation.
In general, employees and employers have to confirm the information about the foreign assignment or the cross-border-activity. Tax consultants, management consultancies and other professional groups can also be authorized for this procedure, however, in this case, a copy of the power of attorney has to be provided.
Issuance of the forms
The forms are issued – depending on the insurance situation – by different authorities:
The responsible authority processes the A1-application electronically and reviews if the A1-certificate can be issued. If the requirements for the continued validity of the German legislation are met, the electronical submission of the A1-certificate to the employer usually takes three working days.
Obligation to carry the A1-Certificate abroad
The employer has to print the A1-certificate in color immediately upon receipt and has to hand it over to the employee. This printout is the original certificate and has to be carried by the employee abroad. A copy should be kept in the personnel file of the seconded employee. Generally, it is recommended to forward a third copy to the company of the host country.
If the A1-certificate is not available before starting to work abroad, it is recommended to carry the confirmation of receipt of the request or the copy of the questionnaire at first. Generally, the request should be filed in a timely matter before the foreign assignment starts to ensure it is available at the beginning of the trip abroad and can be carried by the employee to avoid sanctions.
Risks of non-compliance
If an A1 certificate is not carried, the employment abroad may be regarded as an uninsured activity and thus as illegal employment. Despite existing social security agreements, in case of a missing A1-certificate, employees may be subject to the legal provisions applicable abroad, so that additional social security contributions or double payments of social security contributions may have to be paid.
Further risks are:
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Tax alert on the major changes resulting from the 2019 MEXICAN FEDERAL REVENUE LAW.
*The summary and comments provided by LEA member firm Garrido Licona y Asociados, S.C.
Here you can read the whole article.
Compensation received by an employee for the termination of his / her employment relationship is subject to taxation - provided that the preceding activity has been defeated by domestic taxation, the Finance Court Baden-Württemberg ruled.
The case of a worker who had moved to France and was still working for his German employer was discussed. His working wage was taxed in France. When the employment ended by a dissolution contract, the man received a settlement. The German tax office wanted to see these taxed to the proportion here in Germany, as it corresponded to the duration of his residence in Germany during the entire period of employment.
Rightly so, the Finance Court Baden-Württemberg ruled on 16th January 2018 (Case 6 K 1405/15). The severance pay is proportionately taxable to the extent that the income received for the previously exercised activity has been defeated by domestic taxation. The now limited taxable plaintiff had been fully taxable for a period of 260 months during the employment relationship. At least to that extent the compensation is subject to domestic taxation.
The cross-border commuter regulation only applies to an active activity. The severance pay, however, refers to a past activity. The double taxation agreement with France should be interpreted as meaning that the severance pay is based on the place of work principle.
(Finance Court Ba-Wü / STB Web)
The Financial Court (FG) Münster has decided that a taxation right for so-called third state revenues can not be exercised without regard to the provisions of the Double Taxation Convention (DTA) with the source state (third state).
Third-country income is income that does not come from the FRG or the other country of residence. In addition, if the Federal Republic of Germany has no right of taxation and the source state passes on its right of taxation to another state, the national readmission clause does not apply if the income in the source state is itself subject to the limited tax liability.
Germany - Switzerland - France
The plaintiff lived in the years of the dispute together with his wailing wife mainly in Germany, worked in Switzerland and moved into France, a second home, from which he visited every working day his place of work in Switzerland. DBAs exist between all three states (Germany-Switzerland, Germany-France and Switzerland-France). The wages payable for employment in Switzerland were taxed in France. Switzerland did not tax the wages due to the cross-border regulations of the DBA Switzerland-France. In their income tax declarations, the plaintiffs treated the wages as being tax-free in Germany. The tax office, on the other hand, included the wages in the assessment basis for income tax assessments.
No application of the national readmission clause
The FG Münster brought the action against this with judgment of 1st July 2018 (ref. 1 K 42/18 E). The court first denied the application of the national recidivism clause, stating that income resulting from an activity carried out in Switzerland is subject to limited taxation in Switzerland. The fact that Switzerland "passed on" its right of taxation for that income to France under the Double Taxation Convention concluded with France does not meet the requirements of the readmission clause.
Revision approved for fundamental importance
In view of the fact that the Federal Republic of Germany is entitled to a right of taxation on wages in relation to France, the court states that Germany can not exercise this right of taxation without taking into account the DBA concluded with Switzerland. Since Germany has allocated the right of taxation for Switzerland's wages earned in Switzerland, Germany can not rely on France for having a right of taxation for third-country income.
Because of the fundamental importance of the issue, the Senate has approved the revision of the Federal Finance Court.
(FG Münster / STB Web)
A creditor may seek enforcement of benefits under a contract for works in the Member State in which those services were provided under the contract.
The European Court of Justice (ECJ), by order of 4th October 2018 (Case C-337/17), clarified the legal responsibilities in international construction business involving subcontractors. In the case under negotiation, two Polish companies had concluded contracts for the execution of construction works. Subcontractors were also employed under a provision of national law which established joint and several liability of the investor with the executing contractor. In addition, real estate purchases in Spain played a role.
The judges of the ECJ clarified that the holder of claims is generally free to bring an action for annulment of a claim against the court of the place where the obligation has been or should be fulfilled. Otherwise, the creditor would be required to bring his claim before the court of the defendant's domicile, and that jurisdiction may be absent from any connection with the place of performance of the debtor's obligations to his creditor.
Since, in the present case, the claim of the creditor is to safeguard his interests in the execution of the obligations under the works contract, that place is Poland.
(European Court of Justice / STB Web)
If the employer temporarily postpones the employee to work abroad, the times required for outward and return journeys must be remunerated as work. This was decided by the Federal Labor Court.
The plaintiff is employed by the defendant construction company as a technical employee and has an employment contract to work on changing construction sites in Germany and abroad. From 10th August to 30th October 2015, the plaintiff was sent to a construction site in China. At his request, the employer booked a return flight in business class instead of a direct flight in economy class, with a stopover in Dubai. For the four days of travel, the employer paid the plaintiff the contractually agreed remuneration for eight hours each, for a total of € 1,149.44 gross. In his claim, the plaintiff demands reimbursement for another 37 hours on the grounds that the total travel time from his home to the external job and back is paid as work.
Revision was partially successful
The Labor Court dismissed the claim. The State Labor Court upheld the plaintiff's appeal. The defendant's appeal was partly successful in the Federal Labor Court (BAG). If the employer temporarily postpones a worker abroad, the journeys to and from the external job would be made solely in the interests of the employer and should therefore be remunerated as work. In principle, the travel time required for a flight in economy class is required, according to the judges in their judgment of 17th October 2018 (ref. 5 AZR 553/17).
Renegotiation at the state labor court
In the absence of sufficient findings of the Regional Labor Court on the extent of the travel times actually required of the plaintiff, the Senate could not decide on the matter conclusively and has therefore referred them back to the State Labor Court for renegotiation and ruling.
(BAG / STB Web)
Since 29th September 2018, EU-wide rules for electronic identification (eIDAS Regulation) have come into force. It aims to help citizens and businesses cross-border access to their online services.
These include the ability to file tax returns online, open a bank account or start a business, enroll in schools and access medical information online, while ensuring the principles of personal data protection. Cross-border use of electronic identification systems can save European businesses and governments more than € 11 billion annually.
EU countries must recognize identification systems of other Member States.
Since 29th September 2018, all EU countries are required by law to recognize national electronic identification systems from other Member States that have already notified and comply with the eIDAS Regulation. Germany and Italy have completed their application procedure, Luxembourg and Spain are close to completion, and Croatia, Estonia, Belgium, Portugal and the United Kingdom have also started.
(EU Commission / STB Web)
The report is provided to LEA Global by Dr. Nick Molinaro, Performance Consultant with LEA member firm Wiss LLP.
Dr. Molinaro is a scheduled presenter at the upcoming World Conference in October. He is a licensed psychologist and a consultant in sport and performance psychology working in association with Wiss & Company to bring executive performance assessment and development capabilities to clients.
For questions or further information please contact:
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Canada is one of the world’s most economically developed countries, with a standard of living, infrastructure and industrial base that closely resemble its southern neighbor, the United States. Canada and the U.S. share the largest land border in the world, stretching from the Pacific Northwest to the Maine/New Brunswick border. The countries also share the waters of four of the five Great Lakes.
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Over the past 25 years, the global supply chain has shifted from its manufacturing bases in the United States and Europe to an Asian base dominated by China. China’s rapid development over this period has not been purely due to government policies, per se. Instead, the country’s large and inexpensive supply labor has been the main driver in this phenomenon.
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THE RISKS, REWARDS AND CHALLENGES
With its diverse and plentiful resources, and a continentwide desire among governments to create jobs and bolster their national economies, Africa is a place of interest for the international business community.
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We thought you would find the following article and slides of interest - Cyber-Related Claims Without a Breach? They’re Coming.
The materials are provided to LEA by Joseph Brunsman and Daniel Hudson with the Chesapeake Professional Liability Brokers, Inc.
For questions or further information please contact:
Joseph E. Brunsman Bio
P: +1 443.949.5228
If you have clients that operate a business that is involved with obtaining, managing or using the personal data of residents of the European Union, note the date May 25, 2018. That’s when the General Data Protection Regulation /GDPR becomes the law.
There are significant implications for entities if they:
This Sage document is a summary of what you should know regarding GDPR.
Sage’s dedicated GDPR website can be found at https://www.sage.com/en-gb/gdpr/
Here is the latest China Briefing magazine issue CROSS BORDER E-COMMERCE IN CHINA from LEA member Dezan Shira & Associates.
This issue of China Briefing offers foreign investors a practical guide to selling to China through CBEC. The issue introduces the market landscape, before diving in to the sector’s legal and regulatory framework. It then compares the advantages and disadvantages of different CBEC business models.
In this issue of China Briefing:
Dezan Shira & Associates is our partner and a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in Asia. Since its establishment in 1992, the firm has grown into one of Asia's most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, Dezan Shira Asian Alliance member-firms in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in the United States, Italy and Germany.
This is the last full budget by the current government before the elections. The budget focuses on agriculture, rural economy and healthcare. On the tax front, one of the biggest changes has been the reintroduction of Long Term Capital Gains tax @ 10% on sale of listed Indian shares and mutual funds. India has also clearly stated that it would come down heavily on cryptocurrencies.
*Source Ashok Maheshwary & Associates LLP
The European Union (EU), via the EU Commission has enacted two key regulations relating to Data processing; the General Data Protection Regulation (GDPR) and the Network and Information Security Directive (NISD).
While both came into force in April 2016, they will not apply until May 25th 2018.
*Source GDPR summary prepared by Michael R K Mudd MHKCS, Managing Partner, Asia Policy Partners LLC.
This article has been updated to reflect the timeline and some content. The original first appeared in Compterworld Hong Kong and may be viewed here.
Foreign investors in Vietnam are realizing increasing profitable opportunities because of steady regulatory reform and the gradual expansion of market access to previously restricted sectors. While the market may be opening, many foreign investors still find it challenging to establish their operations effectively in Vietnam. Those who are ill prepared to act upon regulatory updates, revisions to investment restrictions, or other changes to Vietnam’s investment environment can quickly find the setup and expansion process to be an overwhelming experience.
In this issue:
Read the article here.
*Source LEA member firm Dezan Shira & Associates
We thought you would find the article of interest - Why the Future of Your Firm Depends on Hiring Women, and How to Retain Them.
The article was provided to LEA by the Chesapeake Professional Liability Brokers, Inc.
India has been opening its economy for foreign investors at a rapid pace under the new government led by Prime Minister Modi.
There have been several changes in the Foreign Direct Investment Regime in India in the last couple of months, the latest being opening up of Single Brand Retail in India.
Summarize of those changes you can read in this document.
Planning for Potential and Seizing Opportunity
For 2018, manufacturers expressed significant optimism for their businesses, the industry, and the economy.
The political focus on manufacturing and movement on tax reform, reduced regulations, and improvements to healthcare undoubtedly provide a foundation for this positive outlook. The growing U.S. and global economies, the weak dollar, rising energy and commodity prices, and improved business and consumer confidence also support this outlook.
Regarding priorities for 2018, growing sales, cutting costs, attracting and retaining talent, and utilizing technology to reduce risk and build a competitive advantage remain critically important.
More than 450 manufacturing executives participated in the survey, which includes the opinions of respondents who produce industrial/machining, transportation/automotive, construction, food and beverage, and other products.
Here you can read or download the 2018 NATIONAL MANUFACTURING OUTLOOK AND INSIGHTS.