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German tax authorities appear to be re-evaluating the availability of withholding tax relief on dividend distributions to US-owned German entities treated as disregarded for US tax purposes. While no formal denial has yet occurred, recent information requests indicate a potential shift in administrative practice with significant implications for US investors.

On 11 March 2025 the Council reached an agreement on the exchange of information for GloBE Information Returns (GIR) for companies affected by Pillar Two. This is designed to create a Union-wide basis for the automatic exchange of information on GloBE Information Returns. For companies with Pillar Two duties, this means that in future they will be able to file their GIR centrally in only one member state. DAC9 thereby provides a substantial simplifica-tion for multinational and large German groups of companies that fall under the German Mini-mum Tax Act (MinStG).

After a wait of over a year, on 5 December 2024 the German Federal Ministry of Finance published its final guidance on application of the ban on deduction of operational expenses under Section 4k of the German Income Tax Act (Einkommensteuergesetz – EStG) for hybrid mismatches. It includes crucial statements on applying Section 4k, which are of particular practical importance to US inbound structures. Here we’ve summarised the most crucial effects for companies concerned.

Including an increase in funding volumes and faster payout. We’ve put the most important details together below.

Cologne Fiscal Court has held that section 50d(1) sentence 11 of the German Income Tax Act [Einkommensteuergesetz – EStG] has merely procedural character. The judgment con-tributes significantly towards eliminating legal uncertainty and has set limits on the tax authori-ties’ pro-taxation stance. Here are the details.

On 2 August 2022, the tax authorities published a circular on the application of tax deductions under 50a of the German Income Tax Act (Einkommensteuergesetz – EStG) for remuneration from software development services. The BMF circular concerns cases in which German businesses develop software using businesses that are resident abroad.

In May 2022, the European Commission presented a draft directive to equal out the tax treatment of equity and debt, which allows for the deduction of notional interest on equity on the one hand, and contains a further limitation on interest deduction on the other.