Germany’s current applicable anti-treaty shopping provision has long been controversial. According to the provision, a foreign (holding) company is only entitled to WHT relief under a DTC or PSD if certain very specific substance requirements are met. In the past, German tax authorities interpreted the regulation rather strictly and held the view that a mere asset management activity is not sufficient to fulfil the requirements of a foreign company’s “substance”.
However, in ECJ rulings Deister and Juhler Holding of 20 December 2017 and GS of 14 June 2018, the court constituted an infringement of both freedom of establishment and PSD. The regulation is not limited to “wholly artificial arrangements” and does not allow counter-evidence.
The German legislator has now published a draft law that should amend the provision to supposedly bring it in line with the recent EU case law.
In this webinar, we discussed the draft law on the basis of various cases and presented the ramifications on typical investment structures via Luxembourg and the UK.