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Changes to German transfer pricing regulations affect PEs

01 May 2012

The German Ministry of Finance published a draft Bill of the Annual Tax Act for 2013. The publication, dated March 5 2012, will implement several EU as well as OECD regulations into the German Tax Law. Oliver Wehnert and Ivo Tankov of Ernst & Young explain what these changes mean for taxpayers and their transfer pricing operations.

The German Ministry of Finance's (GMF) proposed changes present a number of implications for taxpayers. They specifically focus on: implementing EU directives, which allow for greater cooperation between tax administrations operating in different jurisdictions; introducing changes to transfer pricing legislation, which will now be more in line with the 2010 OECD Model Tax Convention (MTC) as well as the 2010 Report on the Attribution of Profits to Permanent Establishments (the Report); and amending the VAT Act so that it now includes new regulations on the location of services being rendered as well as the new requirements for official invoices.

Underlying OECD concepts utilised in the draft legislature Authorised OECD approach in terms of Article 7 of the MTC and the Report The proposed Annual Tax Act has introduced some specific amendments to Article 1 Foreign Tax Act (FTA), which, among other topics, also covers permanent establishments (PE). The amendments proposed...



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