Flick Gocke Schaumburg German & Corporate Insights — Issue #08 / December 2015 1

Contents Editorial International Tax Dear readers, Proposed abandonment of the regime for Again in this new issue of GTCI we highlight a number of portfolio investments — need for action?...... 2 German legal developments and court rulings particularly relevant CFC income not subject to tax in Germany...... 3 to international corporations and investors in Germany. Tax & Corporate BEPS & information exchange: Tax court affirms principle of confidentiality and secrecy in tax matters. . . 4 We start with summing up a discussion draft regarding a Insights Accounting for tax uncertainties under IAS 12 — reform of the German Investment Tax Act published by the new developments...... 5 Federal Ministry of Finance in July. Then, we take a closer Updates on recent business trends, look at a ruling by the Federal Tax Court according to legislation and case law in Germany Real Estate which income attributed to German shareholders under German real estate transfer tax provisions — substitute the rules on controlled foreign companies (CFCs) is not tax base unconstitutional ...... 6 subject to trade tax. Investment Taxation On October 5, the OECD presented the final BEPS package Reform of the German Investment Tax Act...... 8 of measures for a comprehensive and coordinated reform Corporate Law of international tax rules. We explain what consequences Bonn Hamburg Breaking old habits in German corporate finance: New the package will have in practice. Also, we outline the main Johanna-Kinkel-Straße 2-4 Amelungstraße 8–10 53175 Bonn 20354 Hamburg rules on convertible bonds and preference shares and proposals made in the long-awaited draft “Uncertainty Phone +49 228/95 94-0 Phone +49 40/30 70 85-0 their tax implications...... 9 over Treatments” interpretation published for [email protected] [email protected] Transposition of the EU Accounting Directive public comment by the IFRS Interpretations Committee. Frankfurt (2013/34/EU)...... 11 MesseTurm, Friedrich-Ebert-Anlage 49 In addition, we take a closer look at German real estate 60308 Frankfurt/Main Representative offices: Competition Law transfer tax provisions, outline the main changes to be Phone +49 69/717 03-0 expected from the reform of the German Investment Tax [email protected] Vienna Crying over spilt milk: German Federal Cartel Office Am Heumarkt 7 requires organic dairies to demerge following incorrect Act and examine the new rules on convertible bonds and Berlin 1030 Vienna information in merger control notification...... 12 preference shares and their tax implications. Finally, we Friedrichstraße 69 Austria deal with the transposition of the EU Accounting Directive 10117 Berlin Phone +43 1/713 08 14 News ...... 14 Phone +49 30/21 00 20-20 [email protected] (2013/34/EU) and report on a recent post-merger investi- [email protected] gation initiated by the Federal Cartel Office. Zurich Contact ...... 15 Munich Bahnhofstraße 69a Brienner Straße 29 8001 Zurich We hope our current choice of topics finds your interest. 80333 Munich Switzerland Phone +49 89/80 00 16-0 Phone +41 44/225 70-10 The FGS editorial team [email protected] [email protected] German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 2

from less-than-10% shareholdings in subsidiaries was abol- owned foreign subsidiary. The foreign subsidiary should Proposed abandonment of the ished with effect from March 1, 2013. As a result, the be based in a country which does not tax exemption regime for announced amendments should complement the amend- and dividends from portfolio investments in (foreign) ments realized to date. companies — neither under national law nor under the law portfolio investments — need for of treaties. The portfolio shares should be action? Limitations of loss offsetting transferred before the new provisions of Sec. 8b(4) CITA- According to the discussion draft any losses in connection draft will be set into force. But given the fact that only a In July 2015, German’s Federal Ministry of Finance pub- with portfolio shareholdings, e.g. from a disposal or a discussion draft exists at the moment, corporate share- lished a discussion draft regarding a reform of the Ger- write-down to market value, could be offset only against holders should not be too hasty in transferring their port- man Investment Tax Act. Besides fundamental changes capital gains from portfolio shareholdings. Any remaining folio investments. It is not yet clear whether the govern- to the taxation of income received by German investors balance of losses from portfolio shareholdings could be mental draft will contain the described provisions. A through investment funds, the draft proposes a signifi- carried forward and offset against future profits from premature transfer of shares would result in a — probably cant amendment to the participation exemption rules in portfolio shareholdings, with no time limitations. The loss unnecessary — tax burden. Also, according to current law Sec. 8b of the German Corporate Income Tax Act carryforward would be subject to the general change-in- capital gains would be tax-exempt up to 95%, 5% would (CITA), namely that the 95% tax exemption for capital ownership rules and, therefore, could be forfeited upon a still be taxable. gains derived by corporate shareholders from portfolio relevant shareholder change. investments would be abandoned. According to the Contact draft law (Sec. 8b(4) CITA), such gains would be fully Reduced for venture capital investments Dr. Arne von Freeden taxable. If the draft is adopted and enacted, the new The discussion draft also proposes that capital gains from Phone +49 228/95 94-266 [email protected] rules will take effect on January 1, 2018. Capital gains certain venture capital (e.g. start-up) investments would (Bonn office) realized after December 31, 2017 would then be taxed. benefit from a reduced tax on capital gains during the period 2018–2027. The tax on eligible capital gains would Dr. Dietmar Lange be reduced to 30% of the acquisition costs of the shares Phone +49 228/95 94-0 Current law and proposed new rules [email protected] Under the current law, capital gains realized from sales of sold, but would be limited to the amount of corporation (Bonn office) shareholdings by German corporate shareholders are (in tax paid on the capital gains derived from the shares. To most cases) effectively 95% exempt from tax, with no benefit from the reduced tax rate, the shares would have minimum shareholding requirement. The discussion draft to be newly issued shares bearing voting rights, not be proposes abolishing the participation exemption for capi- listed on a stock exchange, and have been held for at least tal gains in cases where a German corporate shareholder three years. directly holds less than 10% of the share capital of the cor- poration whose shares are being sold. Until 2013, the 95% Practical consequences tax exemption also applied to dividends received by Ger- To avoid tax liability for capital gains on shareholdings of man corporate shareholders, with no minimum sharehold- less than 10% in Germany, German corporate shareholders ing requirement. The 95% exemption for dividends derived could transfer their portfolio investments to a wholly German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 3

the German shareholder at the end of the CFC’s fiscal year. income as a matter of course. On top of 15% of corpora- CFC income not subject to trade At the level of the German shareholder, it is treated as tion tax and an effective 0.875% of solidarity surcharge, a tax in Germany capital income in the case of a natural person. If the share- German corporation owes an additional 7–18% of trade holder holds the shares in the CFC as business assets for tax on CFC income, depending on the municipality in The German Federal Tax Court in Munich ruled in March tax purposes, the income is treated as business income. which it maintains domestic permanent establishments. that income attributed to German shareholders under the No credit for foreign is available for trade tax pur- German rules on controlled foreign companies (CFCs) is The usual exemptions or methods of mitigating double poses. What’s more, the trade tax itself does not consti- not subject to trade tax. The decision aligns the tax treat- taxation available under German , such as Germa- tute a deductible business expense, so no mitigation ment of CFCs with the treatment of income from foreign ny’s participation exemption (Sec. 8b of the Corporate whatsoever is available for the trade tax on a corpora- permanent establishments. Now, the response of the Ger- Income Tax Act (Körperschaftsteuergesetz), the partial tion’s CFC income. man legislature and tax authorities remains to be seen. income system (Teileinkünfteverfahren) or the final with- holding tax (), do not apply to CFC To complement the CFC rules, Sec. 20(2) of the Foreign German CFC legislation has long been a bone of conten- income. For income tax purposes, the CFC income is Tax Act stipulates a switch-over from the exemption tion between and the German tax authorities. therefore subject to full taxation at the level of the share- method applicable under a double to the credit First introduced in 1972, its main provisions are contained holder, either (progressive) personal income tax or (flat) method. The switch-over applies to income of a foreign in Secs. 7–14 of the German Foreign Tax Act (Außensteu- corporate income tax. A credit for foreign taxes borne by if that income were subject to ergesetz). Under these rules, German resident taxpayers the CFC is available upon application. However, it is sub- the usual CFC rules — were it derived by a foreign corpo- can be taxed on the income of their foreign affiliates. ject to the usual caveats for tax credits, such as the hazard ration instead of a permanent establishment. In this case, This requires in most instances that more than 50% of of excess tax credits — under German law, the guiding there is broad agreement that no trade tax is due on such the shares or voting rights in a foreign corporation are principle is “use it or lose it”, since there is no carryforward income since there is a comprehensive exemption for held by German resident taxpayers. In exceptional cir- or carryback for excess tax credits. income from foreign permanent establishments for trade cumstances, the threshold can be lowered to 1% or even tax purposes (Sec. 9 no. 3 of the German Trade Tax Act abandoned altogether for certain types of capital Whether German trade tax is due on CFC income contin- (Gewerbesteuergesetz)). income. The income of the foreign corporation must be ues to be hotly debated in the literature. On the one hand, taxed at a low rate, which German tax law defines as a trade tax, by its very nature, is supposed to be charged on In a recent case, the plaintiff challenged this status quo by threshold of 25% or less (effective) tax rate. Furthermore, German domestic income only. According to the prevailing arguing that CFC income derived from a foreign affiliate the foreign corporation’s income must be “passive”. Any opinion in the German tax literature, it is designed to com- should not be subject to trade tax. Although the lower tax income is regarded as passive if the is unable to pensate municipalities in Germany for the usage of their court of Düsseldorf did not agree and ruled in favor of the show that it meets the criteria of at least one out of ten infrastructure by businesses based locally. To this end, tax administration (ref. no. 16 K 2513/12 G, dated Novem- categories of active income. Interest income in particular trade tax law contains exemptions for income from foreign ber 28, 2013), the Federal Tax Court in Munich sided with is in the crosshairs of CFC legislation. permanent establishments and subsidiaries. the plaintiff (ref. no. I R 10/14, dated March 11, 2015). It stated that CFC income is not subject to German trade tax To the extent that the legal requirements for CFC taxation On the other hand, the Foreign Tax Act contains clear under current tax law. are met, the (positive) income of the CFC is attributed to hints that the legislature sees a trade tax burden on CFC German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 4

The decision was based on Sec. 9 no. 3 of the German information between German and foreign tax authorities Trade Tax Act, which stipulates that income derived by a BEPS & information exchange — is allowed only if the exchange is required (“erforderlich”) trade tax payer from a foreign permanent establishment is German tax court affirms the and probably relevant (“voraussichtlich erheblich”). to be subtracted from income for trade tax purposes. The court argued that CFC income should be regarded as principle of confidentiality and The exchange of information is required only if the serious deriving from a permanent establishment abroad. It also secrecy in tax matters possibility exists that a (specified) foreign state has a right specifically mentioned that the treatment of foreign cor- to tax and otherwise would not be able to exercise such porations (Secs. 7–14 of the Foreign Tax Act) and foreign On October 5, 2015, the OECD presented the final BEPS right. The exchange of information is probably relevant permanent establishments (Sec. 20(2) of the Foreign Tax package of measures for a comprehensive and coordi- only if, at the time of the request for information Act) is aligned more closely by virtue of its decision. nated reform of international tax rules. This will result in exchange, a reasonable possibility (“vernünftige Mögli- increasing transparency because domestic and foreign chkeit”) exists in the view of the requesting authority that While this was a happy outcome for the plaintiff, it cannot tax authorities will be authorized to exchange information the information is relevant for taxation. General requests yet be predicted how the German legislature and tax (“country by country reporting”). However, the Tax Court or “fishing expeditions” do not fulfil such requirements. authorities will respond. It is generally deemed unlikely of Cologne ruled that, according to existing German tax that the law will remain unchanged in this area. The Ger- law, the principle of confidentiality and secrecy in tax Furthermore, the exchange of information is not justifiable man legislative process for the fiscal year 2016 does not, matters prohibits the exchange of information if a breach if the information is exchanged only for the sake of effi- however, instigate a change in the tax law relevant in this thereof is not justified by specific taxation issues in indi- ciency, i.e. to reduce the tax authorities’ workload in inves- case. Taxpayers should thus pay very close attention to vidual cases. tigating the facts of the case. future developments. The Tax Court of Cologne decided on September 7, 2015 The subject of the case was the German tax authorities’ Contact (ref. no. 2 V 1375/15) that the German principle of confi- intention to exchange information (e.g. an overview of the Dr. Martin Weiss dentiality and secrecy in tax matters according to Sec. 30 group, the ownership structure, the business model) with Phone +49 30/21 00 20-20 of the General Tax Code (AO) generally limits the multiple foreign counterparts on several digital-economy [email protected] (Berlin office) exchange of information between German and foreign tax companies in order to generally determine the reasons for authorities. Under existing tax law, this principle is sus- a comparably low effective group tax rate. One of these pended only if certain legal bases are applicable (i.e. infor- companies successfully applied for an interim order to mation exchange under a double tax treaty, Sec. 117 of the prohibit such exchange because this flow of information is General Tax Code, Act Implementing EU Directive 2011/16/ not required and probably not relevant for taxation. EU), under which the exchange of information would be permissible. However, the mere fact that a taxpayer is an The tax court affirmed the opinion of the taxpayer, for the affiliated company does not suspend the application of following reasons in particular: the principle of confidentiality and secrecy in tax matters. • The request concerned only the general business model of digital-economy companies and the taxation thereof. These legal bases stipulate that the exchange of The sole aim was to gain knowledge of how to close German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 5

loopholes in tax law. such exchange can be gained by requesting an interim of the standard. The draft Interpretation proposes guid- • The requests did not include a (detailed) description of order pursuant to Sec. 114 of the General Tax Code. ance on the recognition and measurement of current and the facts of the case that could be relevant for taxation. However, it can be assumed that German tax law will be deferred tax liabilities and assets in circumstances in • The requests of the German tax authorities were similar amended (soon) to implement the BEPS measures, espe- which there is uncertainty over income tax treatments. in every case except for the name of the company. cially measure 13 (country by country reporting). Time will The main proposals are as follows: Therefore, the tax authorities could not demonstrate that tell what principles will be introduced into tax law, ena- the request was relevant for the taxation of any given bling further, more general information to be exchanged As a first step, accounting for uncertainty over income tax taxpayer. The tax authorities were not able to prove any between German and foreign tax authorities. treatments requires a suitable basis, e.g. the entire tax relevance for taxation in individual cases. computation, individual tax uncertainties or a group of • The files of the German tax authorities included docu- Contact related tax uncertainties. The accounting basis can be ments which indicated whether the taxation of the Dr. Sven Kluge considered a key input, since selecting the entire tax com- group companies involved was in line with German or Phone: +49 228/95 94-0 putation would make determining the recognition thresh- [email protected] foreign tax law. (Bonn office) old obsolete by reducing the accounting issue to a mere • The tax court did not accept the German tax authorities’ question of measurement (one-step approach). According arguments that such exchange was relevant because it Dr. Sven-Eric Bärsch, LL.B. to the proposed guidance, there will be a choice only would increase their efficiency in investigating the facts Phone +49 228/95 94-0 between considering each tax treatment separately or [email protected] of the case and taxation procedure. (Bonn office) considering some tax treatments together as a group, • The tax authorities did not specify for which individual depending on which approach better predicts the resolu- affiliated company a tax loophole might exist; it is not suf- tion of the uncertainty (DI/2015/1 para. 11). This results in a ficient justification for the exchange of information that a two-step approach, where uncertain tax treatments are tax loophole might exist for any affiliate (in any country). recognized only if they exceed a defined minimum proba- Accounting for tax uncertainties bility threshold. Further, the tax court ruled that the principle of confiden- under IAS 12 — tiality and secrecy in tax matters is not sufficiently pro- Accounting for uncertainty over income tax treatments is tected by the fact that the foreign tax authorities would new developments also strongly influenced by the level of detection risk pre- keep the information secret. On October 21, 2015, the IFRS Interpretations Commit- scribed by the standard setter. The proposed guidance tee (IFRS IC) published for public comment the long- requires an entity to assume that a taxation authority with According to the tax court judgment, the exchange of awaited draft Interpretation “Uncertainty over Income the right to examine amounts reported to it will do so and information without reference to a taxpayer’s individual Tax Treatments” (DI/2015/1). have full knowledge of all the relevant information when taxation issues is not allowed under current German tax examining such amounts (DI/2015/1 para. 13). law. The exchange of information is permitted only if the Although accounting for tax uncertainties is of considera- purpose and relevance for taxation of the exchange is ble practical importance, it is not specifically addressed by In terms of recognition, the proposed guidance requires described in detail. Otherwise good arguments exist to IAS 12. Therefore the publication of the draft Interpretation an entity to consider whether it is probable (i.e. more likely justify such exchange. Temporary legal protection against can be considered a milestone in the further development than not) that a taxation authority — which might include German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 6 a court — will accept an uncertain tax treatment. If the prediction if the possible outcomes are binary or one out- profit (or loss) and tax bases, unused tax losses, unused entity concludes that this is probable, DI/2015/1 para. 15 come is much more likely, whereas the expected value is tax credits or tax rates (DI/2015/1 para. 21). requires (i) taxable profit (or loss) or tax rates — for cur- more appropriate if the possible outcomes are widely dis- rent taxes — and (ii) tax bases, unused tax losses, unused persed. These proposals are in line with the methods As IAS 12 is more or less silent on the question of how to or tax rates — for deferred taxes — to be deter- already developed and applied in practice. address uncertain tax treatments, one might well ask mined consistently with the tax treatment included in the whether the scope of the proposed guidance is not too entity’s income tax filings. Otherwise the entity is obli- The draft Interpretation also proposes guidance on how to broad for an interpretation (as opposed to an amendment gated to reflect the effect of uncertainty in determining deal with changes in facts and circumstances. If an entity’s of the standard). Nevertheless, the draft Interpretation can the related taxable profit (or loss), unused tax losses, conclusions about the acceptability of tax treatments or be considered a decisive step in developing an appropri- unused tax credit or tax rates (DI/2015/1 para. 16). its predictions as to the effect of uncertainty change, the ate solution to this important area of accounting. taxable profit (or loss) and the tax bases, unused tax The proposed guidance applies a uniform recognition losses, unused tax credits or tax rates have to be adjusted Contact threshold (“probable”) to the relevant uncertain tax accordingly in the period of the change (DI/2015/1 para. Lars Ruberg treatment(s). Thus the timing of payments does not affect 18). Here, the draft Interpretation refers to the results of Phone +49 228/9594-0 [email protected] the amount of current tax recognized. This had long been examination(s) by taxation authorities and distinguishes (Bonn office) disputed, since many entities derived their accounting between the explicit and implicit acceptance of an entity’s methods for uncertain tax treatments from IAS 37, which tax treatment. Whereas the explicit acceptance of an enti- defines different recognition criteria for contingent liabili- ty’s tax treatment may affect similar tax treatments for ties (“probable”) and contingent assets (“virtually cer- other periods (DI/2015/1 para. A5), the implicit acceptance tain”). As a consequence, it was unclear whether an imme- of an entity’s tax treatment is not necessarily a new fact German real estate transfer tax diate payment in respect of a disputed amount — e.g. for similar tax treatments that are not within the scope of provisions — substitute tax base when a tax examination results in an additional charge but the examination (e.g. similar tax treatments for other peri- unconstitutional the entity intends to appeal — justified the recognition of ods (DI/2015/1 para. A6). a current tax asset (the realization of which was consid- In July 2015, the German Federal Constitutional Court ered probable, but not virtually certain). The draft Interpretation does not introduce any new dis- held that the substitute tax base (Ersatzbemessungs- closure requirements, but highlights the relevance of the grundlage) particularly applicable to reorganizations and In terms of measurement, the draft Interpretation pro- existing disclosure requirements in IAS 1 para. 122 and share deals is unconstitutional. The legislature now has poses reflecting the effect of uncertainty by using either paras. 125-129. Thus an entity must determine whether it until June 30, 2016, to adopt new regulations with retro- the most likely amount — the single most likely amount in should disclose judgements made in the process of apply- active effect as of January 1, 2009. It has already a range of possible outcomes — or the expected value, i.e. ing its accounting policy to determine taxable profit (or responded to this call. the sum of the probability-weighted amounts in a range of loss) and tax bases, unused tax losses, unused tax credits possible amounts. The entity must use the method that it or tax rates. An entity must also determine whether it Background concludes will better predict the resolution of the uncer- should disclose information about the assumption(s) it Pursuant to Sec. 8(2) of the German Real Estate Transfer tainty. The most likely amount may provide the better makes and other predictions used in determining taxable Tax Act (RETTA), the substitute tax base is an alternative German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 7 method to determine the value of real estate in cases in cases, the purchase price as the regular tax base should retroactive effect, it also applies to past RETT-triggering which the real estate is not directly acquired. Thus, the generally reflect the fair market of the real estate for RETT events that occurred after December 31, 2008 as follows: substitute tax base is particularly applicable to direct or purposes. indirect transfers of at least 95% of the shares in real prop- (i) The RETT-triggering event has already occurred, but erty-owning entities and reorganizations. The substitute Consequently, the Federal Constitutional Court called neither RETT nor the real-estate values have been tax base is determined in accordance with the German Val- upon the legislature to introduce a new provision to con- assessed yet; uation Tax Act (Bewertungsgesetz — VTA). According to stitutionally determine the substitute tax base by June (ii) The RETT-triggering event has already occurred and Sec. 138 et seq. VTA the substitute tax base must, for 30, 2016, with retroactive effect as of January 1, 2009. the real-estate values have been assessed, but are not instance, correspond (i) to 80% of the land value in the The new provision will therefore apply to RETT-triggering yet binding because an appeal has been filed against case of undeveloped land and (ii) in principal to 12.5 times events realized after December 31, 2008, unless the the values determined; the actual annual rent minus a certain depreciation dis- application is prevented for procedural reasons by the (iii) The RETT-triggering event has already occurred, but count depending on the age of the building in the case of German General Tax Code (Abgabenordnung). Further- has not yet been indicated or detected. developed land. These methods provide only a rough more, the court decided that RETT should not be levied guide, so the value calculated is usually substantially lower based on the substitute tax base until a new provision However, if the RETT-triggering event has already than the fair market value of the real property. In many takes effect. occurred and either RETT or the real-estate values have cases, the determined value reflects an average of only (i) been assessed only on a preliminary basis (e.g. Sec. 165 approx. 50% of the real property’s fair market value in the The legislature’s response General Tax Code), the new provision will generally not case of developed land and of (ii) approx. 70% of the prop- The German legislature has already responded to the call apply to that RETT-triggering event because the legiti- erty’s fair market value in the case of undeveloped land. by the German Federal Constitutional Court. The pro- mate expectation regarding the determination of the sub- posed legislation, including the revised provision on the stitute tax base is protected (Vertrauensschutz, Sec. 176 Decision substitute tax base, was recently adopted by German Fed- General Tax Code). On July 17, 2015, Germany’s Federal Constitutional Court eral Council and will take retroactive effect as of January 1, published a decision dated June 23, 2015 — 1 BvL 13/11, 1 2009. According to this legislative proposal, the substitute Recommendation for taxpayers BvL 14/11 — according to which the provision concerning tax base for RETT-triggering events must be determined The decision of the Federal Constitutional Court and the the substitute tax base violates the principle of equality by applying the real-estate values for inheritance and gift response of the German legislature will increase RETT (Gleichheitssatz) pursuant to Art. 3(1) of the German Con- tax purposes pursuant to the Valuation Tax Act likewise exposure in cases in which the substitute tax base applies. stitutional Law and is, hence, unconstitutional. This is for RETT purposes (Sec. 157 et seq. VTA). Real-estate val- The scope of the substitute tax base refers particularly to because the substitute tax base significantly deviates from ues for inheritance and purposes have been direct or indirect transfers of at least 95% of the shares in the fair market value of the real estate without reasonable adapted in the recent past in order to more closely reflect real property-owning entities and reorganizations. Both cause. For the purposes of equality in taxation, the substi- the fair market values of real estate. future RETT-triggering events and RETT-triggering events tute tax base should — according to the view of the Fed- that occurred after December 31, 2008 will be subject to eral Constitutional Court — instead result in values that Impact the revised provision on the determination of the substi- broadly reflect the fair market values of the real estate, as The new provision on the substitute tax base will apply to tute tax base. For RETT-triggering events that have in the case that the real estate is directly acquired. In such all future cases of RETT-triggering events. Due to its already occurred, repercussions could arise in a German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 8 considerable number of cases in Germany. Taxpayers are discussion draft distinguishes between investment funds new partial exemption regime at the investor level. The therefore well advised to scrutinize whether any such and special investment funds. following will be tax-exempt at the level of the investor: RETT-triggering events have occurred recently or are • 20% of the income from investment funds that continu- expected to occur in the future, thereby increasing the New opaque tax regime for investment funds ously invest at least 51% of their assets in stocks, RETT burden. For investment funds, the discussion draft provides for an • 40% of the income from investment funds that continu- opaque tax regime to replace the decades-old principle of ously invest at least 51% of their assets in domestic real Contact transparent investment fund . Both estate, and Dr. Nicole Schwäbe domestic and foreign investment funds will in future be • 60% of the income from investment funds that continu- +49 69/717 03-0 subject to German corporate income tax plus solidarity ously invest at least 51% of their assets in foreign real [email protected] (Frankfurt office) surcharge (15.825%) on their domestic income (in particu- estate. lar dividends from German corporations, rental income and capital gains on the disposal of domestic real estate, For private investors, income from investment funds is and capital gains from the disposal of significant invest- subject to the regime (Abgeltungsteuer). Tax ments in German corporations). To the extent an invest- exemptions for dividends (partial income procedure, par- ment fund has tax-exempt charitable investors, churches ticipation exemption) do not apply. Reform of the German or foundations or its shares are held in the context of Ger- Investment Tax Act man retirement investment contracts, it can obtain an Modified transparent tax regime for special exemption from German corporate income tax. Invest- investment funds In July 2015, the German Federal Ministry of Finance ment funds will generally remain exempt from German The discussion draft contains separate provisions for spe- published a discussion draft for a proposed German trade tax under the same circumstances as at present. cial investment funds, which are defined as investment Investment Act (Investmentsteuerreformge- funds that: setz). It sets out substantial changes to investment tax- At the investor level, income from the investment fund will, • comply with a set of requirements which in principle ation in Germany by introducing two tax systems func- in principle, be taxed only in the event of distribution or dis- match the currently applicable criteria for investment tioning independently of one another. posal of the investment fund units. By way of exception, the funds investor will be taxed on an advance lump-sum amount • do not have more than 100 investors and Scope of application (Vorabpauschale), which is determined at 80% of the basic • do not have individuals as investors. According to the discussion draft, the definition of an interest rate applied to the redemption price of the fund investment fund is in principle based on regulatory law. units at the beginning of each calendar year (actual distri- In contrast to the currently applicable rules, indirect Consequently, an investment fund will be any collective butions of the fund will be deducted). The advance lump- investments of individuals via partnerships will be detri- investment scheme within the meaning of the German sum amount is restricted to the amount of increase in value mental (time-limited grandfathering provisions apply for Capital Investment Code. The two main exceptions are sin- of the fund units during the calendar year in question. individuals currently investing via partnerships). gle-investor funds, which will also qualify as investment In principle, the opaque tax regime described above will funds, and partnerships, which will not qualify as invest- To take into account prior tax burdens on the fund’s also apply to special investment funds. However, special ment funds unless they are UCITS partnerships. The income at the level of the fund, the draft provides for a investment funds may opt for a full corporate income tax German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 9 exemption (known as a ‘transparency option’) if: Transitional provisions Breaking old habits in German • in respect of German source participation income and The new provisions will apply from January 1, 2018. At that other German source income that is subject to German time the draft provides that units in investment funds and corporate finance: new rules on withholding tax at source, the special investment fund corporate investment companies under the current law convertible bonds and preference irrevocably declares vis-à-vis the party being obliged to are deemed to be disposed of. Such notional disposal will withhold withholding taxes that the tax certificates not result in immediate taxation of the capital gains but shares and their tax implications should not be issued to the special investment fund but will be determined separately and taxed at time of the When the long-planned Amendment of the Stock Cor- to the investors, and actual disposal. poration Act will finally become law in early 2016, it • the special investment fund levies withholding taxes at a could spark new interest in preference shares and con- rate of 15% on German source real-estate income and Concerning ‘millionaire funds’ (set up in the past in con- vertible bonds, and not only with financial institutions. other German source income that is not subject to Ger- nection with the flat tax regime), the discussion draft pro- However, the tax consequences regarding convertible man withholding tax at source. vides for the grandfathering rule to be limited in time to bonds should be considered carefully. changes in value occurring by December 31, 2017. A lump- A special investment fund will always be exempt from sum threshold of € 100,000 for future increases in value So far, German law has taken a strict stance on preference trade tax as the exemption from trade tax is a prerequisite will apply. shares without voting rights. According to Secs. 12, 139-141 for qualifying as a special investment fund. of the German Stock Corporation Act (AktG), voting rights Contact can be excluded only if the preference shareholder is enti- The currently applicable transparency principle will con- Dr. Jan Dyckmans tled to an “advance dividend” which is distributed before tinue to apply to the investors in special investment Phone +49 69/717 03-0 the ordinary shareholders may receive their share in the [email protected] funds. This means that the investors will be taxed on dis- (Frankfurt office) company’s profits (Vorabdividende) and if dividends that tribution proceeds, proceeds deemed distributed (slight are omitted for whatever reason are accrued and have to changes compared to the current regime, e.g. 10% of the be paid in later years. If dividends are omitted, sharehold- capital gains from the disposal of any capital claim will in ers receive full voting rights until all arrears are paid. Fur- future be deemed to be distributed), and capital gains thermore, as omitted dividends are accrued, preference from the disposition of fund units. Such proceeds are shares without voting rights of German banks organized fully subject to taxation (no participation exemption as stock corporations do not count towards Tier 1 capital applies). If a special investment fund does not opt for a under the Basel III rules as implemented by the Capital tax exemption, such income will also be subject to a par- Requirements Regulation (EU) No. 575/2013. To remedy tial exemption regime at the investor level: 60% of Ger- these shortcomings, the Amendment of the Stock Corpo- man source participation income and 20% of German ration Act (Aktienrechtsnovelle, BR-Drucks. 22/15) pro- source real-estate income will be tax-exempt. Investors vides for a twofold relaxation: Voting rights may also be that are subject to corporate income tax can achieve a excluded (i) if the preferential dividends are not accrued full tax exemption. on omission and do not have to be paid in later years (cf. Sec. 139(1) sentence 1 AktG) and (ii) if the preferential German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 10 treatment of the shareholders of preference shares con- institution, fulfilling regulatory requirements or requests (Bundesfinanzhof) has ruled for American-style converti- sists (only), for example, in a larger dividend than that for a restructuring or a liquidation of the company. ble bonds (which can be converted at any time until their paid to regular shareholders (Mehrdividende, cf. Sec. Whether and to what extent companies and especially maturity) that no deferred item may be booked for the 139(1) sentence 2 AktG). Although these changes primarily banks will make use of “crisis convertibles” and “regula- conversion premium (judgment of November 11, 2014, aim at German financial institutions, they might also make tory convertibles” remains to be seen. case no. I R 53/13). preference shares without voting rights more attractive to companies in other sectors and to investors. Preference shares are classified as dividend-generating In addition, interest payments on convertible bonds might equity for German tax purposes irrespective of their dis- be subject to German withholding taxes (15% to 25%). The The new rules regarding convertible bonds aim to enhance tinctive characteristics such as the newly introduced non- official view of the Federal Ministry of Finance is that at legal certainty. According to Sec. 221(1)AktG, convertible cumulative dividends or advance or larger dividends. Divi- least interest payments derived from certain contingent bonds grant the creditor the right to be repaid in cash or dends from preference shares are, therefore, not convertibles are not subject to German withholding taxes. in shares of the issuing company. However, there may be tax-deductible for the German issuer and are subject to a However, representatives of the ministry have indicated situations in which the company would prefer to decide combined effective rate of approximately 29% for income- that this view might not apply for other convertible bonds. for itself whether and when the conversion should be tax and trade-tax purposes, whereas foreign investors are Therefore, the newly won legal certainty with regard to brought about, especially in restructuring cases. Most subject to zero or limited German withholding taxes if tax the company law on convertible bonds should be put to commentators have, therefore, regarded both mandatory treaty benefits or EU directives benefits are granted. use carefully, and legal certainty with regard to tax mat- convertible bonds (Pflichtwandelanleihen) and soft man- ters may still be obtained only through a binding ruling datory bonds, which enable the company to decide on the Convertible bonds should be regarded as interest-gener- from the German tax authorities. conversion (umgekehrte Wandelanleihen), as permissible ating debt for German tax purposes, as the Federal Minis- under current law. Three new words inserted into try of Finance has ruled that even contingent convertible Contact Sec. 221(1) AktG and supplementary amendments to bonds are classified in this way. Therefore, interest pay- Dr. Thomas Lakenberg, M.Jur. (Oxford) Secs. 192 et seqq. AktG (concerning capital increases to ments on these bonds are entirely deductible for income- Phone +49 228/95 94-208 [email protected] create the shares needed for the conversion) intend to tax purposes, but the deductible portion for trade-tax (Bonn office) incorporate at least soft mandatory convertible bonds (Gewerbesteuer) purposes is only 75%, thereby resulting explicitly into the German Stock Corporation Act. Argua- in an effective tax rate of approximately 3.75%. Dr. Sven-Eric Bärsch, LL.B. bly, convertible bonds with a mutual conversion right and Phone +49 228/95 94-0 [email protected] mandatory convertible bonds without any conversion The financial advantage known as “conversion premium”, (Bonn office) right should also be covered by the new rules. Further- i.e. the difference between the interest rate of the convert- more, the proposed amendment of Sec. 192(3) AktG pro- ible bond and the (usually higher) interest rate of a bond vides for a conditional capital increase without the usual without a conversion right, is normally recorded sepa- limit (50% of the company’s nominal capital) if the condi- rately as a deferred item on the assets side with a corre- tional capital increase is adopted for the sole purpose of sponding capital reserve for German (tax) accounting pur- either (i) enabling the company to avert illiquidity or over- poses. The release of the deferred item generally leads to indebtedness, or (ii) if the company is a financial tax-deductible expenses. However, the Federal Tax Court German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 11

Transposition of the Act (PublG) and the German Stock Corporation Act energy tax). The classification of revenues as sales reve- (AktG), as well as their related introductory acts. Its key nues within the meaning of Sec. 277(1) HGB no longer EU Accounting Directive points are: requires the revenues to be related to products or services that are typical of the company’s line of business. On July 17, 2015 the EU Accounting Directive (2013/34/ Increase in the thresholds for the size classification of This means that in future, income from ancillary activity EU) was transposed into German law by the Accounting companies and possibly Group contributions are also recognized Directive Implementation Act (BilRUG). This act is the The thresholds for the classification of companies as small, under revenues. most comprehensive revision of German accounting law medium-sized or large under section 267 HGB have been since the Accounting Law Reform Act (BilMoG) of May increased as follows: Elimination of certain items in the income statement 25, 2009. Extraordinary income and extraordinary expenses must no small companies medium-sized large companies companies longer be shown as separate items in the income state- The Accounting Directive Implementation Act (BilRUG) is previously now previously now previously now ment pursuant to Sec. 275 HGB. Instead, extraordinary based on the EU Accounting Directive (2013/34/EU) of balance sheet total ≤ 4.84 ≤ 6.00 ≤ 19.25 ≤ 20.00 > 19.25 > 20.00 business transactions must now be assigned to the other June 26, 2013, on the annual financial statements, consoli- (in millions of euros) income statement items. In addition, companies that are net turnover ≤ 9.68 ≤ 12.00 ≤ 38.50 ≤ 40.00 > 38.50 > 40.00 dated financial statements and related reports of certain (in millions of euros) at least medium-sized are obliged to provide an explana- types of undertakings. average number of ≤ 50 ≤ 50 ≤ 250 ≤ 250 > 250 > 250 tion in the notes on business transactions of exceptional employees size or significance, unless the amounts are of minor

The EU Accounting Directive replaces the Fourth Council importance. Now that the items “extraordinary income” Directive (78/660/EEC) on the annual accounts of certain The adjustment of the thresholds converts about 7,000 and “extraordinary expenses” will no longer appear in the types of companies and the Seventh Council Directive medium-sized companies into small companies, disbur- income statement, the differentiation between a result (83/349/EEC) on consolidated accounts. It provides the dening them from certain disclosure duties and from the from “ordinary business activities” and an “extraordinary new basis of accounting law within the EU and serves the obligation to have their single-entity financial statements result” has been eliminated. This will influence key perfor- enhanced harmonization in order to make annual financial audited. mance indicators, which may be relevant for the compa- statements and consolidated financial statements more ny’s rating or for agreed covenants. comparable within the EU. Furthermore, it aims to relieve In addition the thresholds for the exemption from the the administrative burdens on small and medium-sized to prepare consolidated financial statements under sec- Regulation of the amortization period of self-created enterprises (SMEs). tion 293 HGB have been raised by approximately 4%. intangible assets and of goodwill acquired for valuable consideration The BilRUG transposes the EU Accounting Directive into Extension of the definition of sales revenues Sec. 253(4) HGB contains a new provision on the sched- German law, amending it only to the extent necessary to The definition of ‘sales revenues’ in Sec. 277(1) HGB has uled depreciation and amortization of self-created intangi- bring it into line with the Directive and relieving the been extended. They are now defined as revenues result- ble assets and of goodwill acquired for valuable consider- administrative burdens on SMEs to the greatest extent ing from selling, renting or leasing products or from pro- ation. If the expected useful life of a self-created intangible possible. It primarily amends or adds provisions to the viding services after the deduction of rebates, VAT and asset or of goodwill acquired for valuable consideration German Commercial Code (HGB), the German Disclosure other taxes directly related to sales revenues (such as cannot be reliably estimated, the original production or German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 12 acquisition costs of this asset or goodwill are to be amor- Contact The acquisition of Söbbeke was subject to merger con- tized over a period of, typically, ten years. Dr. Ingo Fuchs trol clearance by the Federal Cartel Office (FCO), which Phone +49 228/95 94-0 was granted following the 2011 notification. Soon there- [email protected] Amendment to the requirements for the release (Bonn office) after, the FCO became aware that it had been given false from the obligations under the provisions of Secs. 264 information in the merger control proceedings, which led et seqq. HGB Dr. Marco Meyer the FCO to initiate a formal divestiture proceeding. As a The requirements of Sec. 264(3) HGB under which a sub- Phone +49 228/9594-0 result, the FCO conducted comprehensive investigations [email protected] sidiary that is included in consolidated financial state- (Bonn office) covering all organic dairies in Germany, including ments of an EU/EEA parent is to be released from the Andechser and Söbbeke in particular. To assess the mar- obligations to prepare single-entity financial statements, ket impact of the transaction, the FCO had to define the have them audited, and make disclosures under the pro- relevant markets. It came to the conclusion that, from a visions of Secs. 264 et seqq. HGB have been amended. demand-side perspective, a distinction has to be made From now on the EU/EEA parent that prepares the between product markets for conventional dairy prod- exempting consolidated financial statements must state Crying over spilt milk: German ucts and those for organic milk products. The joint mar- that it is willing to assume liability for the obligations Federal Cartel Office requires ket share of Andechser and Söbbeke was well over 50% entered into by the subsidiary up to the balance sheet organic dairies to demerge fol- in certain ‘white line’ organic dairy products (e.g. organic date of the exempting financial statements. As previ- fruit yoghurt, natural yoghurt, organic fruit quark and ously, this requirement can be met by a statutory lowing incorrect information in organic drinks). As a consequence, the FCO held that the assumption of losses pursuant to a management control merger control notification acquisition of Söbbeke significantly impeded effective or profit transfer agreement under Sec. 302 AktG. competition on several markets identified, which would The German Federal Cartel Office (FCO) initiated a have made the FCO prohibit the merger in the first place. The enlargement of the distribution restriction that was post-merger investigation on French dairy Savencia’s discussed within the framework of the legislative proce- acquisition of two German organic dairies for having Therefore, the 2011 merger control notification did not cor- dure was not included in law. The BilRUG changed a vari- provided the FCO with false information in prior merger rectly describe the market situation and was incomplete ety of legal provisions with regard to the supplementary control proceedings. concerning certain rights of Savencia to exert influence on disclosures beyond the changes mentioned above. Andechser. The FCO also learned that Andechser had pro- In 1999, Savencia acquired shares in Andechser, an organic vided incorrect sales figures when asked for additional All of the amended provisions apply to financial state- dairy headquartered in Germany. Savencia markets several data in 2011. ments and management reports for financial years begin- conventionally manufactured types of cheese sold under ning after December 31, 2015. However, it is possible to brands such as Bresso, Chaumes, Fol Epi, Géramont, Le In order to prevent the FCO from issuing a formal dissolu- apply the threshold provisions and the amended definition Tartare, and Saint Albray. It was known until recently tion order on the acquisition of Söbbeke, Savencia of sales revenues retroactively to financial statements and under the name of Bongrain. Starting in 2011, Savencia divested its shares in Andechser to the initial vendor. Sub- management reports for financial years commencing after gradually acquired shares in Andechser’s rival dairy Söb- sequently, the FCO closed its investigation, surprisingly December 31, 2013. beke, and this led to full acquisition of Söbbeke in 2013. without imposing a fine on Savencia/Söbbeke for having German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 13 provided false information. Extended reportability under German merger control mergers in a future edition of our German Tax & Corpo- rules rate Insights. Fines on undertakings: Up to 10% of turnover even in In addition to the acquisition of (i) direct or indirect con- merger control proceedings trol over another undertaking — a concept well known Lessons learned from Savencia/Söbbeke The decision of the FCO not to impose a fine on Savencia/ from, inter alia, the EU Merger Control Regulation — the To summarize the recent Savencia/Söbbeke case, it is Söbbeke contrasts with its recent practice in merger cases German merger control regime provides for various types clear that undertakings subject to merger control pro- involving closing without clearance (‘gun-jumping’). Here, of concentrations to be reportable hereunder. From a for- ceedings should take a transparent and honest approach one should bear in mind that the FCO is entitled to impose eign law perspective, the following cases are of particular vis-à-vis the FCO. The FCO is a powerful authority both in significant fines on undertakings (up to 10% of their world- note: (ii) the acquisition of market-relevant assets, (iii) the terms of legal competences and resources. Whereas most wide aggregate turnover) and individuals (up to €1 mil- acquisition of 25 per cent (or more) of shares in the capital case teams have a very hands-on approach to the infor- lion) for closing before clearance (including foreign-to-for- or voting rights and (iv) any other combination that ena- mation required for a merger control notification in a case eign mergers) and has done so on various occasions in bles one or several acquirer(s) to directly or indirectly that is likely to be unproblematic, one should not underes- recent years. In line with the practice of the EU Commis- exercise a competitively significant influence on another timate the FCO’s strictness and attention to detail in cases sion, which imposed a €20 million fine on Norwegian sea- undertaking (which covers acquisitions of minority share- which raise substantive issues in the market. The fact that food company Marine Harvest in August 2014, the FCO holdings of below 25 per cent). Savencia/Söbbeke escaped a fine comes as a surprise and has generally taken a strict stand on gun-jumping (e.g. a may be due to facts not in the public domain. We certainly €4.5 million fine on Mars for closing its acquisition of In addition, the German system provides for the reporta- do not expect this to be the FCO’s future approach when Nutro early in 2008). bility of ‘fictive’ horizontal mergers: If at least two share- becoming aware of an undertaking violating German holders acquire shares of 25 per cent (or more) in an merger control provisions, in particular the standstill obli- FCO’s divestiture proceedings in the event of undertaking, these shareholders will be deemed to have gation or the obligation to provide correct market infor- gun-jumping merged on the market(s) of the joint venture, and there- mation. The FCO will regularly conduct formal divestiture pro- fore become ‘undertakings concerned’ within the mean- ceedings once it has learned that the standstill obligation ing of, inter alia, the regime of turnover thresholds. Thus, Contact has been violated. When conducting such a post-merger even if the turnover figures of the target and one of the Dr. Florian C. Haus review, the FCO is not bound to the statutory one-month acquirers/shareholders do not exceed the German Phone +49 228/95 94-383 [email protected] phase I review period applicable to concentrations noti- thresholds (combined worldwide turnover of all under- (Bonn office) fied prior to closing. Irrespective of the FCO’s authority takings concerned exceeds €500 million; one undertak- to impose fines in the event of gun-jumping, the FCO will ing exceeding €25 million and at least one further under- Dr. Stephan Wachs only prohibit a concentration significantly impeding taking exceeding €5 million of domestic turnover), such Phone +49 228/95 94-0 [email protected] effective competition. If the FCO does not prohibit the acquisition has to be notified to the FCO — irrespective (Bonn office) concentration as a result of such a post-merger review, of the target’s turnover — if the shareholders met such the acquisition will be deemed valid under German civil thresholds alone. In foreign-to-foreign mergers, the law retroactively. transaction must also have sufficient domestic effects in order to be notifiable. We will deal with foreign-to-foreign German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 14

Firm news Flick Gocke Schaumburg joins Flick Gocke Schaumburg introduces Taxand network notary services in Frankfurt Restructuring and insolvency law Flick Gocke Schaumburg is to join Taxand, an interna- specialist joins FGS in Hamburg Flick Gocke Schaumburg expanded its Frankfurt practice tional association of independent tax advisory firms. As for corporate law and real-estate law with the introduc- of January 1, 2016, the firm will become the exclusive The tax team at Flick Gocke Schaumburg’s new office in tion of a notary service on October 1, 2015. Dr. Finn Lub- Taxand member for the German market. Hamburg has welcomed Dr. Günter Kahlert as a new berich, who has joined the firm from Paul Hastings, is partner. Günter Kahlert is regarded as one of Germany’s responsible for the new service. Taxand was established in 2005, and today counts more leading experts in restructuring and insolvency tax law. than 400 partners and over 2,000 tax professionals in In addition to his position as a notary, Finn Lubberich has nearly 50 countries. The organisation focuses on high-qual- Günther Kahlert specializes in providing tax advice at the many years of experience in corporate law/M&A, particu- ity international tax advice, including tax law, transfer pric- interface of tax law and insolvency law. He advises compa- larly with cross-border M&A transactions, financing, and ing and litigation. “Our Taxand membership formalizes and nies on restructuring and insolvency tax matters in times real-estate projects. Lubberich initially joins Flick Gocke enhances our long-established best-friends approach to of crisis and during insolvency proceedings. In particular, Schaumburg as an Of Counsel. He will work most closely tax law,” comments Professor Thomas Rödder, Chairman of he regularly works for insolvency administrators. with the corporate law and real-estate law team headed the partnership Flick Gocke Schaumburg. “We will gain by partner Dr. Michael Wiesbrock. additional access to tax-law resources in numerous mar- “Günter Kahlert’s tax expertise is a real gain for our consult- kets, establishing and further expanding our relationships ing activities,” states Professor Thomas Rödder, Chairman “Introducing notary services is a logical extension of our with partner firms, which will enable us to act even more of FGS. “With his support, we will be able to provide insol- activities to provide advice on tax law and economic law quickly and efficiently in cross-border engagements.” vency administrators with a far wider range of tax advice.” to industrial businesses, real-estate companies, family- Flick Gocke Schaumburg has for many years advised clients owned businesses, and private clients,” states Professor Flick Gocke Schaumburg will be the first German firm to on tax and legal aspects of restructurings and related mat- Thomas Rödder, Chairman of Flick Gocke Schaumburg. “It become one of the core member firms that together ters, but it does not offer insolvency administration. “Insol- adds another discipline to Flick Gocke Schaumburg’s mul- design the organization’s strategy. “We very much look vency law is having a growing impact on the tax aspects of tidisciplinary approach.” forward to working together with experienced fellow pro- restructurings,” comments Günter Kahlert. “My role in the fessionals in many countries and to having the opportu- new FGS Hamburg team at the interface of tax law and nity to actively help in the shaping of a constantly growing insolvency law will be both an incentive and a challenge.” network,” Rödder remarks.

FGS opened an office in Hamburg in August with a team Flick Gocke Schaumburg will continue to maintain its of around 20 partners and associates. It is the firm’s fifth long-standing proven relations with recognized law and office in Germany. In July, FGS recruited lawyer and tax advisory firms abroad, such as its alliance with LeitnerLeit- advisor Hans-Henning Bernhardt as an Of Counsel for the ner in Austria. Hamburg team. German Tax & Corporate Flick Gocke Schaumburg Insights German Tax & Corporate Insights — Issue #08 / December 2015 15

New partner for the FGS corporate Flick Gocke Schaumburg Our firm in brief litigation team in Bonn German Tax & Corporate Insights Flick Gocke Schaumburg Lawyers Public Auditors Flick Gocke Schaumburg has welcomed a new addition This newsletter is intended Tax Advisors Partnership to its corporate litigation/corporate law department in for information purposes with limited professional only. It should not be relied liability (Partnerschaft mbB), Bonn. Dr. Matthias Schatz, LL.M. joined the firm in Octo- upon as legal advice nor founded in 1972 ber as an associated partner from German firm Meilicke should it be used as a basis www.fgs.de for any action or final decision Hoffmann & Partner. without specifically verifying Offices the applicability and relevant Bonn, Berlin, issues on their merits in each Frankfurt, Munich, Hamburg, Matthias Schatz will be part of Flick Gocke Schaumburg’s case. representative offices in dispute resolution/arbitration team, which is headed by Vienna and Zurich Dr. Lambertus Fuhrmann. His areas of specialism include Your email address is included in the FGS contact Advisors the in-court and out-of-court settlement of shareholder database maintained by 105 partners, more than 250 associates disputes, legal action concerning the liability of public Flick Gocke Schaumburg. If you no longer wish to bodies, and post-M&A disputes. He also advises family- receive news from FGS, Expertise German and international owned businesses on conflict prevention and supports please feel free to unsub- scribe. tax law, corporate law/M&A, companies in questions of corporate law and stock corpo- labor law, antitrust law, ration law. You can subscribe/ accounting law, succession/ unsubscribe by email to: private wealth/foundations, [email protected] tax-exempt organizations, “The arrival of Dr. Schatz marks an important step for us in tax offences/white-collar If you have any questions, and regulatory matters, tax our expansion,” comments Professor Thomas Rödder, please contact: compliance and auditing/ Chairman of Flick Gocke Schaumburg. Jochen Bahns business valuation ([email protected]) or Torsten Engers International Network ([email protected]). Flick Gocke Schaumburg has an alliance with law firm LeitnerLeitner in Austria and Central and Eastern Europe. Our firm maintains success- ful long-term relationships with leading independent law firms throughout Europe, in the United States and in Canada as well as in all other major jurisdictions. This basis enables Flick Gocke Schaum- burg to represent and advise clients worldwide.