Changes to Germany's anti-treaty shopping regulations expected to be effective January 1, 2012

December 2011

Overview

The European Commission ("EC") formally requested that Germany amend its existing anti-treaty shopping regulations due to alleged infringement on both the freedom of capital and the EU Parent-Subsidiary Directive. Although the EC does not object explicitly to the anti-treaty shopping regulations' intent, it considers the requirement to prove the existence of the foreign company's own active business activity beyond what is necessary to attain the regulations' objective of preventing tax evasion. Therefore, the German government is considering revising the core of these anti-shopping regulations, effective January 1, 2012.

In response, the upper house of the German parliament passed a draft tax bill on November 25, 2011 containing revised anti-treaty shopping regulations.

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