On 18 February 2020, the EU Council adopted simplified VAT rules for small businesses. These should help to reduce administrative burdens and compliance costs for small businesses.
Businesses have VAT obligations and act as VAT collectors. This results in compliance costs that are proportionally higher for small businesses than for larger companies. Under the current VAT regime, the VAT exemption for small businesses can only be claimed by domestic businesses. Under the reform now adopted, small businesses established in other member states may in future be granted a similar VAT exemption.
Annual turnover thresholds
Under the new scheme, small businesses may qualify for simplified VAT compliance rules if their annual turnover does not exceed a threshold set by a member state concerned, which may not exceed EUR 85,000. Under certain conditions, small businesses from other member states that do not exceed this threshold will also be able to benefit from the simplified scheme, provided that their total annual EU-wide turnover is not exceeding EUR 100,000.
The new regulation will be applicable from January 1, 2025.
Anybody who is resident in Germany at the time of inheritance pays inheritance tax in Germany regardless of any other modalities abroad.
A comparable acquisition made under foreign law on account of death is also subject to German inheritance tax if the heir is a German national at the time the tax arises. This is the case if the heir has a residence or habitual place of abode in Germany. This was decided by the Hessian Finance Court in its ruling of August 22, 2019 (Ref. 10 K 1539/17).
The claim had been filed by a foreign woman who was living in Germany at the time of her father's death. When she - a few months later - declared acceptance of the inheritance, she had already given up her residence here. Nevertheless, the tax office took the view that the inheritance was subject to German inheritance tax, irrespective of the fact that under Italian law an inheritance did not automatically accrue to the legal heir, instead an explicit acceptance of the inheritance was required.
The Hessian Finance Court followed this argumentation: The plaintiff was resident in Germany at the time the tax accrued, so German inheritance tax law was applicable. However, according to Italian law, the inheritance tax payable by the plaintiff had to be credited against the tax to be assessed in Germany.
The appeal is pending at the Federal Fiscal Court under file number II R 39/19.
The European Commission provided the member states a temporary aid framework to support the economy in the Corona crisis.
"EU state aid rules provide member states with a toolbox to act quickly and effectively - without undermining the unity that Europe needs in a crisis," said Executive Vice-President Margrethe Vestager.
Among other things, the new framework will allow member states to grant subsidies or relief (e.g. in taxes) of € 500,000 to companies and to secure loans with state guarantees. The eased rules are expected to take effect in the coming days.
Already on March 13, 2020, the commission had listed in a notification that state aid is now possible without generating problems with the EU Trade Commission. Based on the experience gained from the financial crisis in the years 2007 to 2009, the temporary framework, which is now being rapidly consulted with the member states, will make further aid possible in the short term. For example, airlines could receive short-term support, even if they had already received strict conditions for state aid in the past.
The Federal Ministry of Economics and the Federal Ministry of Finance decided that, with immediate effect, export transactions on short payment terms of up to 24 months can also be covered within the EU and in certain OECD countries by official export credit guarantees of the Federal Government.
The new state guarantees are intended in particular to alleviate possible shortages in the private export credit insurance market. They are made possible by a decision of the European Commission to amend the provisions of the so-called Short-Term Notification. This temporarily removes the list of marketable risks, i.e. countries for which normally no cover by state export credit guarantees is permissible.
The commission has thus responded quickly and flexibly to the requests of several member states, including Germany. It has given member states the possibility to react promptly and decisively should private export-credit insurers withdraw in response to the corona pandemic.
Besides the EU, beneficiary countries include Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland, the United Kingdom and the United States. The extended cover facilities are initially limited until December 31, 2020. Details of the extended cover facilities for short-term business can be found on the website of the Federal Mandate.
Since the introduction of the free movement of labor for the Eastern European states, the number of cross-border commuters from these countries in particular has increased. This is shown in a study by the Institute for Employment Research (IAB).
Between 2010 and 2019, the number of cross-border commuters working in Germany rose from under 69,000 to more than 191,000. It has thus almost tripled since 2010. This increase is mainly due to the introduction of the free movement of labor for workers from the Eastern European EU accession states. The number of border commuters has increased not only in Germany's border regions, but also in districts located in the upcountry.
Most workers come from Poland
In most federal states, cross-border commuters from Poland form the largest group. Cross-border commuters from the respective neighbouring states also play an important role. In 2019, the second largest group after the 69,000 cross-border commuters from Poland were the 36,000 cross-border commuters from France. In third place were the more than 34,000 Czech cross-border commuters.
In the meantime, the number of cross-border commuters from countries not bordering Germany has also increased significantly. There are now almost 9,000 cross-border commuters from Romania and around 5,000 each from Hungary and Slovakia.
The IAB study is available online here. It is based on labour market data collected before the border closures due to the Corona crisis.
Together with the credit insurers, the Federal Government is setting up a billion-euro protection scheme to secure supplier credits for German companies. The aim is to secure the movement of goods in particular.
Credit insurances protect suppliers against payment defaults if a domestic customer or a customer abroad is unable or unwilling to pay the invoice. With the help of the shield, credit insurers can maintain existing cover commitments and also take on new ones, despite the considerably increased risk of default.
Specifically, the Federal Government will assume a guarantee for indemnification payments by the ECAs of up to 30 billion euro for the year 2020. The associated leverage would result in the coverage of a business volume of about 400 billion euro. The ECAs participate substantially and leave 65 percent of the premium income in 2020 to the Federal Government. In addition, they bear losses up to an amount of 500 million euro themselves and assume the default risks exceeding the guarantee of the Federal Government.
This was announced by Federal Finance Minister Olaf Scholz and Federal Economics Minister Peter Altmaier in a joint press release.
The Cayman Islands, Palau, the Seychelles and Panama are now also on the EU list of non-cooperative countries and territories for tax purposes.
The EU has decided to classify the Cayman Islands, Palau, the Seychelles and Panama as non-cooperative countries for tax purposes. The territories concerned had not implemented tax reforms to which they had committed themselves.
In addition, twelve countries and territories were granted time extensions to allow them to implement necessary reforms. Most of them concern developing countries without a financial centre, which have already made considerable progress, according to the council’s conclusions.
16 countries deleted
Sixteen other countries and territories - Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, Vietnam - have already implemented further requested reforms and have therefore been removed from the list.
The latter should contribute to the ongoing efforts to promote good governance in the tax area worldwide. The list was first established in December 2017 and included countries and territories that have either not engaged in a constructive dialogue with the EU on good governance in the tax area or have not fulfilled their commitments to implement reforms to meet EU criteria in a timely manner.
Appeal to nation-states to prevent tax evasion
Together with the updating of the list, the council has issued guidelines for further coordination of national defensive measures in the tax area vis-à-vis non-cooperative countries and territories already in December 2019. A member states are requested to apply, as of January 1, 2021, a legislative defensive tax measure vis-à-vis the countries and territories on the list in order to encourage them to comply with the criteria of the Code of Conduct for Fiscal Justice and Transparency Verification.
On February 12, 2020, the German Federal Cabinet adopted the new EU directive on the posting of workers. The draft law is intended to improve the situation of employees who are assigned to Germany.
The law is intended to ensure that entire pay grids, overtime rates or even bonuses (for example, dirty-work and hazard allowances) and benefits in kind provided by the employer must in future be paid for all employees working in Germany. At the same time, remuneration can differentiate more strongly according to activity, qualification and professional experience. The draft law also regulates the requirements for accommodation that must be provided by the employer.
The draft bill is also intended to prevent that money received by the employee to reimburse his or her expenses from being offset against the remuneration.
If the listed working conditions are regulated in generally binding collective agreements applicable throughout Germany, they will also apply to posted workers in future - in all sectors.
The law can now be submitted to the Bundesrat and parliamentary proceedings can be initiated. The Implementation Act is scheduled to come into force on July 30, 2020, as provided for by the revised Posting of Workers Directive.
The European Commission has come to the conclusion that the ‘Sanierungsklausel’, a German tax relief for ailing companies, does not constitute state aid within the meaning of EU rules.
The so-called ‘Sanierungsklausel’ allows a distressed company to offset losses in a given year against profits in future years, despite changes in the shareholder structure.
The decision follows rulings by the European Court of Justice (C-203/16 P, C-208/16 P, C-209/16 P, C-219/16 P), which in 2018 annulled a Commission decision on state aid from 2011. In order to implement these judgments, the Commission has assessed the measure against a broader framework, including the provisions of German law which generally allow companies to carry forward losses for tax purposes.
The EU Competition Authority concluded that the restructuring clause does not deviate from these general rules and therefore does not confer a selective advantage on ailing companies compared to other companies.
A European prosecution is to prosecute VAT fraud and misuse of EU funds as of the end of 2020. On January 22, 2019, the Federal Cabinet adopted a draft law for corresponding changes in German law.
The European Public Prosecutor's Office is to be the first independent and de-centralized Public Prosecutor's Office in the European Union to prosecute and submit cases against the EU budget to the court, such as subsidy fraud, corruption and cross-border VAT fraud.
The former head of the Romanian anti-corruption authority Laura Codruța Kövesi will become the first European Public Prosecutor General. The European Public Prosecutor will have his seat in Luxembourg.
In the investigation proceedings conducted by the European prosecution, the relevant legislation of the member states will apply in addition. Supplementary provisions are therefore needed in German law. In addition, the draft law provides, among other things, that the criminal provisions on the protection of private secrets and official secrets will in future also apply to all European public officials.
"We are creating a joint EU criminal prosecution authority that can investigate quickly and effectively across national borders. We are bringing together the know-how of investigators from 22 member states," said Federal Minister of Justice Christine Lambrecht.
About 460,000 jobs in Germany are directly or indirectly linked to exports to the UK. Approximately 60,000 of these are accounted for by employees in the automotive industry. This is the result of a study of the Institute for Employment Research (IAB).
However, the UK's imminent withdrawal from the EU does not reduce exports to zero, according to the labour market researchers, and could also open up new trade opportunities for German companies. The continuing great uncertainty has led many German companies to look for new trading partners in other markets and to restructure their production chains.
In addition, imports from the United Kingdom would also decrease. The extent to which the adaptation of companies to the changed conditions in trade with the United Kingdom could prevent possible job losses was still open.
Germany exported goods and services worth almost 109 billion euro to the UK in 2018. Imports amounted to almost 63 billion euro. The share of exports to the United Kingdom, measured against total exports, was 6.8 percent, while the import share was 4.5 percent. In terms of exports, the United Kingdom is Germany's fifth most important trading partner.
In a decision, the Münster Tax Court dealt with the taxation of capital appreciation on taking up residence abroad, which affects taxpayers if they move abroad and are therefore no longer subject to unlimited taxation in Germany.
According to the Foreign Tax Act (AStG), the taxpayer's withdrawal from unlimited tax liability leads to the fact that, even without a sale, the hidden reserves of major capital company investments held as private assets are disclosed and generate a taxable capital gain.
This so-called exit taxation can be subsequently eliminated upon return. In addition to the reestablishment of the unlimited tax liability, it is also necessary to substantiate that the will to return was already present at the time of departure, as decided by the Münster Tax Court (FG) in its ruling of October 31, 2019 (Ref. 1 K 3448/17 E). The Foreign Tax Act presupposed for the removal of the exit taxation that the taxpayer would not only become liable to unlimited taxation again within five years, but also that the termination of the unlimited tax liability was based on only temporary absence. This was to be seen as a subjective element of the facts in the sense of an intention to return at the time of departure.
The provision (sec. 6 para. 3 AStG) did not apply to failed or abrupted emigration. The intention to re-establish unlimited tax liability did not have to be notified at the time of departure, but could only be substantiated upon return. In the case of the dispute, however, the plaintiff had not succeeded in establishing this credibility.
The Senate has allowed the appeal to the Federal Fiscal Court.
Briefing EURASIA - AN EMERGING BUSINESS PLATFORM
This paper seeks to outline current developments that influence international companies doing business in the greater region of the Eurasian Economic Union (EEU), with a special focus on Kazakhstan, as this country can serve as an efficient entry point to the whole region.
*Source/external link from LEA member firm SCHNEIDER GROUP
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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S∙K∙ Steuerberatungs GbR
Here you can download this information.
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:
Read more about here
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.
Read more about here
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.