Tax Advisers - Deloitte

Germany
business owners (including partnerships and direct, indirect or constructive 25%
shareholders). The tax would be payable only after 10 years, and it would be forgiven
1/10 for every year the business has been continued in a comparable mode.
A little-noticed loophole for non-residents owning taxable domestic assets, such as real
estate, business, industrial property, 10% shareholdings, etc, was inadvertently created
by case law and an administrative follow-up decree. The holding of property
beneficially through a nominee or trustee is examined for income tax purposes (as it
has always been), but no longer for inheritance and gift tax. The principal’s claim
against the nominee being a separate asset, non-residents should be able to escape
German gift or inheritance tax in the underlying German assets.
REITs
The government has proposed legislation accepting a listed German corporation as a
REIT. It would not be taxable, and tax would be levied at the shareholder-level only
(at full rates for residents and withholding rates for non-residents). Residential real
estate is excepted, so its foreign buyers are left without German competition.
Maximum leverage should be 60%. Fifteen percent of the shares must be free float (of
3% or less per shareholder). Any one shareholder may not own more than 10%, but
this applies only directly, so indirect holdings should not be capped.
VAT for holdings
Still pending is a government proposal consolidating EU and other case law on upstream
VAT deductions by holdings. It would allow the deduction for private equity holdings
(as a broad exception for the industry), and otherwise for securities trading firms, for
holdings rendering services to portfolio companies and for holdings with participations
under an overall entrepreneurial concept, a nicely broad but vague definition.
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