GERMANY Law and Practice Contributed by: Stefan Altenschmidt, Pauline Müller and Ina Schwanke, Luther Rechtsanwaltsgesellschaft mbH
4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects There are no special transfer taxes for selling a mining project. Taxation depends on the individual case and on factors such as the legal form of the companies involved and whether it is an asset or share deal. In the case of an asset deal, VAT is exempt if a company or a separately managed business unit within a company is transferred in its entirety, either for consideration or free of charge, or is contributed to a company. Capital gains are subject to regular corporate tax (currently 15%) and trade tax (approximately 15%). In the case of a share deal, trade and corporation taxes are generally payable on the capital gain. The effective tax burden on the capital gain is approxi - mately 1.5% (5% of the capital gain is taxed at around 30%). If the seller is an individual, 60% of the capital gain is subject to income tax. Transfers of company shares are generally exempt from VAT. Furthermore, a share deal is usually also assumed to be a VAT-exempt business takeover. However, if the acquired company owns domestic real estate, real estate transfer tax may be applicable. This tax is subject to state law and ranges from 3.5% to 6.5% of the property value. In the case of a share deal involving a corporation, real estate transfer tax is only payable if one buyer acquires 90% of the shares. When selling entirely through foreign corporate struc - tures, the proceeds from the sale are not subject to corporate or trade tax in Germany. Real estate trans - fer tax is independent of the location of the seller or buyer. 5. Mining Investment and Finance 5.1 Attracting Investment for Mining Stable political, regulatory and economic conditions attract mining and every other business activity. Ger - many offers a well-developed infrastructure compris - ing a dense network of roads and railways, as well as large ports. As a country with a long mining tradition, it has many highly skilled engineers and other pro - fessionals. As one of the strongest industrial nations and a member of the EU, Germany has a high direct
demand for natural resources and good connections to the commodities market. However, while Germany’s political system remains stable, as in other Western countries, the established political parties are losing support. 5.2 Foreign Investment Restrictions and Approvals in the Exploration and Mining Sectors There are no specific restrictions on foreign investment in the exploration or extraction of natural resources. However, such investments may be subject to the general provisions of the Foreign Trade Act and the Foreign Trade Ordinance. When acquiring 20% of the voting rights in a com - pany that extracts, processes or refines critical raw materials, buyers from non-EU or non-European Free Trade Association (non-EFTA) countries are subject to a reporting obligation. This obligation also applies to any further acquisitions that result in the percentage thresholds of 25%, 40%, 50% or 75% of voting rights being reached or exceeded. Within two months of the notification, the Federal Ministry for Economic Affairs and Energy may initiate an investigation and, within a further four months, prohibit the transaction. If the deadlines expire without a decision, the transaction is deemed to have been approved by the Ministry. The Federal Ministry for Economic Affairs and Ener - gy can generally initiate an investigation procedure when 25% or more of the voting rights are acquired, or when additional acquisitions result in the thresholds of 40%, 50% or 75% of the voting rights being reached or exceeded. There is no reporting obligation on the buyer in these cases. The Ministry has the authority to prohibit or restrict foreign investments on grounds of public security and order. 5.3 International Treaties Related to Exploration and Mining Germany generally offers a high level of protection for investments, including those in the exploration and extraction of natural resources. While Germany is not party to any bilateral agreements exclusively concern - ing investments in the exploration or extraction of natural resources, it has concluded over 130 bilateral
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