GERMANY Law and Practice Contributed by: Michael Best, Gerald Herrmann and Jannis Lührs, POELLATH
9.14 Offshore IP Provisions As of January 2018, Germany has restricted the tax deductibility of licence fees or royalty payments to foreign-related parties that benefit from preferential tax regimes (ie, licences or patent boxes), in order to discourage harmful tax practices relating to offshore intellectual property. This restriction, however, does not apply if a preferential tax regime is compliant with the nexus approach of BEPS Action 5 and hence requires a sufficient degree of substance and research activity on the part of the licensor. From 2024 onwards, tax deductibility is only restricted if the licence fees are taxed below 15% under the preferential tax regime (below 25% before 31 December 2023).
where businesses have significant interaction with users through digital channels. However, the EU draft directive relating to the taxation of digital economy businesses has not yet been adopted, and no German draft legislation has yet been published to this effect. 9.13 Approach to Digital Services Taxation The second legislative proposal relating to the taxa - tion of digital activities that was adopted by the EU Commission in March 2018 (see 9.12 Digital Economy Businesses ) sought to impose an interim digital tax but was rejected at the EU finance ministers’ meeting in March 2019. As one of the opposing EU members, Germany had rejected the proposed European digital tax in order not to pre-empt an international solution at G20 level. With the publication of the EU directive to ensure a minimum level of taxation of multinational enterprise groups (see 9.2 Government Policy and Objectives Approach ), which is intended to target digital economy businesses in particular, national digital taxes are no longer expected.
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