Germany - Impact of recent tax developments on doing business in Germany

Germany has implemented a number of major changes to its corporate tax system over the last year. Mainly, two important Tax Bills for companies doing business in Germany have been introduced: the 2007 Annual Tax Bill (JStG 2007), applicable from January 1 2007, aims, among other things, to counter treaty shopping. The Bill on Tax Features for Introduction of the European Company and Amendment of Other Tax Rules (SEStEG) was enacted on December 12 2006 and contains revised rules for reorganisations and new legislation on other corporate tax issues. In addition, the Federal Ministry of Finance has issued a circular commenting on the qualification of holding companies' activities as entrepreneurs and other related questions. The qualification of a holding company as an entrepreneur is essential to claim input value added tax (VAT). Lastly, the government published new proposals for German corporate tax reform that would become applicable no later than...