Germany and Costa Rica

German Ministry of Finance of 24 October confirmed that the double tax avoidance, the contract between Germany and Costa Rica, will be applied from January 1, 2017.

The agreement, which was signed on 13 February 2014, is the first such agreement between Germany and Costa Rica, and contains the OECD standard for the exchange of information between the tax authorities of the two countries.

The tax on dividends will generally be limited to 15 percent. However, the rate of five percent would apply if the dividend recipient is a company (other than partners), which directly owns at least 20 percent of the shares of the paying company.

Income tax on the interest payments, as a rule, is limited to five per cent. At the same time, the withholding tax on royalties will be capped at 10 percent.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Inheritance tax in Germany

The upper house of the German parliament, the Bundesrat (Federal Council) approved a bill to tighten eligibility criteria for inheritance tax incentives for family businesses.

These changes mean that the tax exemption will be abolished inheritance in excess of EUR 90 million (USD 98.7 million). In total, the exemption from inheritance tax will be applied in most cases, but only if the company has been working for at least seven years, and retains the same level of employment.

Companies in which five employees are working, or less, will be automatically exempt from inheritance tax without any limitation, as compared to 20 employees in accordance with the existing rules.

The new law will be applied retrospectively (ex-post), with the July 1, 2016.

Changes in the rules of inheritance tax in Germany, was caused by the decision of the Constitutional Court in 2014, stating that the existing rules violate the principle of fiscal equality.

Inheritance tax benefited thousands of family firms, which employ more than 50 percent of the German workforce. However, they also talk about the consolidation of inequality and the accumulation of wealth among a relatively small number of families.

Some argue that the reforms do not reach the Constitutional Court's decision, and may be subject to appeal.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Germany the tax cuts

The German government is expected to soon announce the details of the reduction in the amount of tax in excess of EUR 6 billion (USD 6.7 billion), both in 2017 and in 2018.

According to "Handelsblatt", a political agreement on the details of the proposed tax cuts was reached between the two main parties in the ruling coalition, paving the way for the tax reduction.

Chancellor Angela Merkel also confirmed that the government has given permission for moderate tax benefits in 2017 and 2018 during a performance of business leaders on 6 October.

Outlining the federal government's budget plan for 2017 in the Bundestag, the lower house of the German Parliament, 6 September, Finance Minister Wolfgang Schaeuble said that the tax cuts mainly comes from the weakening effect "bit transition", as a result, income tax It keeps pace with inflation, wages, so pushing people on relatively modest incomes in higher tax framework. Schaeuble also said that payroll taxes would be cut, despite the fact that more data is still awaited.

Author: Sergey Panov

managing partner Finance Business Service

Government Building in Germany

The head of German Banks Association asked to government to improve tax range for banks operating in Germany.

Michael Kemmer, the general manager of Germann Banks Association made announce and in his announce he asked the government to take a clear political improvement to Frankfurt as financial center, in consequence of the voting of the United Kingdom they left the EU.

"We need bright signal that Frankfurt, financial center of Germany is ready take on board the services and the supplier of services from Great Britain. It will make possible to create a new jobs and economic growth," Kemmer stressed.

In the tax area, Kremmer said that the government could make German banking sector more competitive by allowing banks to deduct bank levy payments from the their taxable income.

All credit institutions in Germany were as objects of every-year levy balances since January 2011. The levy starts at 0.02 percent for banks with a balance between EUR300m (USD340m) and EUR10bn, and rises in stages to 0.06 percent on balances in excess of EUR300bn.

"As any other European country the banking levy must be tax as operation expenses", Kemmer said.

He also ask Germany refuse of support for the proposed EU financial transactions tax.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Germany agrees with stricter IHT rules
Germany's main political parties have reached an agreement on long-awaited inheritance tax reforms, with the proposed changes expected to be passed by Parliament by July.

Amendments to Germany's inheritance tax law are required after the country's Constitutional Court ruled in 2014 that existing rules breach the principle of fiscal equality.

Under Germany's 2009 inheritance tax law, heirs of assets from companies with more than twenty employees are exempt from inheritance tax provided that the business remains operational for at least ten years and that jobs are maintained. It is a system that many argue helps Germany to maintain high levels of employment and enables small and medium-sized businesses to use assets for growth rather than for paying potentially large inheritance tax bills. Inheritance tax rates in Germany can be as high as 43 percent, depending on the relationship between the deceased and the heir.

However, others argue that these tax breaks are unfair as they benefit mainly wealthy individuals, while also helping to concentrate large amounts of wealth among a relatively small number of families.

Under the changes agreed by the coalition parties, including the Christian Democratic Union, its Bavarian sister party the Christian Social Union, and the Social Democratic Party, companies with fewer than five employees will be exempt from inheritance tax.

Firms employing more than five employees will be liable to inheritance if the company's assets exceed certain thresholds, and those inheriting more than EUR26m (USD29.5m) would have to show that paying inheritance tax would damage their business in order to claim a reduction. The amended legislation would eliminate tax exemptions and reductions completely for inheritances exceeding EUR90m.

The agreed changes will apply from July 1, 2016, although they need to be approved by Parliament before they can be given legal force. The amendments are expected to raise an additional EUR235m in tax revenue.

Author: Olena Kutova

senior lawyer of the Finance Business Service company