GERMANY Law and Practice Contributed by: Alexander Gottstein, MTR Legal Rechtsanwälte
In addition, numerous specific anti‑avoidance rules apply, particularly in the AStG and in withholding‑tax/ relief regimes. In cross‑border cases, treaty provi - sions may limit domestic re‑characterisation effects; conversely, many modern DTAs contain their own anti‑abuse elements (eg, a Principal Purpose Test). 5.2 Anti-Avoidance Mechanisms Germany’s controlled foreign company (CFC) regime (Sections 7 onwards AStG) attributes certain low‑taxed passive income of foreign intermediary entities to Ger - man shareholders. Transfer pricing rules (Section 1 AStG) and extensive documentation/co-operation duties complement the framework as safeguards against profit shifting. Hybrid mismatch arrangements are addressed through neutralisation rules, notably Section 4k EStG (anti‑hybrid). Interest deductibility is restricted by the interest barrier (Section 4h EStG in conjunction with Section 8a KStG). Which rules apply in a given case depends on the specific structure, payment flows, and the relevant transitional/application provisions. 5.3 Blacklists and Non-Cooperative Jurisdictions Germany has enacted the Tax Haven Prevention Act ( Steueroasenabwehrgesetz , StAbwG), providing defensive measures against non‑cooperative tax juris - dictions. The jurisdictions in scope are determined via a German ordinance list ( Steueroasen-Abwehrver - ordnung , StAbwV), which is updated over time and does not simply replicate the EU blacklist. Therefore, the current version of the StAbwV must be checked before assuming specific defensive consequences (eg, restrictions on deductions or relief). 5.4 Reporting Obligations and Disclosure Regimes DAC6 (EU Directive 2018/822) has been imple - mented in Germany through mandatory reporting for cross‑border tax arrangements (Sections 138d to 138k AO), with application starting in 2020 under tran - sitional rules. Country‑by‑Country Reporting (CbCR) applies under Section 138a AO for large groups, with detailed rules and responsibilities, often involving the Federal Central Tax Office ( Bundeszentralamt für Steu- ern , BZSt).
Automatic exchanges of information are organised through EU and international instruments like the Common Reporting Standard/Foreign Account Tax Compliance Act (CRS/FATCA) and their domestic implementation. In practice, timelines, formats and responsibilities are frequently specified through BMF guidance and BZSt notices. 5.5 Role of Tax Authorities and Enforcement Measures German tax authorities enforce international tax matters through assessments, wage‑tax and with - holding‑tax procedures, tax audits, and information exchange. Specialised units (eg, large‑case and group audit teams, transfer pricing audit teams) are com - monly involved. International co-operation is based on DTA information‑exchange provisions, EU mutual assistance instruments, and – where double taxation arises – mutual agreement and dispute‑resolution pro - cedures. In addition to the underlying tax, administrative sur - charges and ancillary payments may apply, such as late filing penalties (Section 152 AO), late payment surcharges (Section 240 AO) or interest (eg, Sec - tion 233a AO). As a tax misdemeanour, “reckless tax understatement” ( leichtfertige Steuerverkürzung ) under Section 378 AO is particularly relevant and may be punished with an administrative fine. Competence generally lies with the local tax offices ( Finanzämter ). In specific areas (eg, withholding tax relief, CbCR, DAC6 and other central international functions), the BZSt plays an important role. 6.2 Criminal Penalties The core criminal provision for tax evasion is Sec - tion 370 AO. The basic offence provides for a fine or imprisonment of up to five years; in particularly serious cases, imprisonment ranges from six months to ten years (Section 370 (3) AO). Attempted tax evasion is also punishable. 6. Penalties and Sanctions 6.1 Tax Penalties
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