As reported in article no. 202, Germany's highest tax court rebuffed attempts by the German tax authorities to overturn dividend stripping schemes (decision of 15 December 1999 - DB 2000, 600). The decision addressed many issues of first impression in the dividend stripping area and received wide attention.
Subsequently, in a directive published in early November 2000 with the concurrence of the central tax authorities of the German states (directive of 10 November 2000 - DB 2000, 2247), the Federal Ministry of Finance instructed local tax authorities not to apply the Federal Tax Court decision to cases other than the one decided.
The directive summarises the high court's holding as follows:
Economic (beneficial) ownership of shares in German corporations passes from the seller to the buyer and back again when shares are sold shortly before the dividend payment date with dividend participation rights and identical shares (or newly issued shares) are repurchased immediately thereafter without such rights.
When handled through the stock exchange, such transactions fall under the stock exchange transaction exception contained in the old version (but not the current version) of § 50c EStG even if the seller and buyer did not deal anonymously with one another and the prices charged did not correspond to stock market prices.
§ 50c EStG constitutes a special anti-avoidance provision governing dividend stripping transactions; hence, the general German anti-avoidance provision contained in the tax procedure act cannot be applied to dividend stripping situations not covered by § 50c EStG.
The directive rejects the court's holdings on all three counts, but states that requests to stay collection of tax pending the outcome of an appeal should be granted. The tax authorities thus appear determined to re-litigate the above issues.
Jonathan Sheehan gives an Irish perspective in the October 2016 edition of The American Lawyer on the European Commission's decision that Ireland granted undue tax benefits of up to EUR13 billion, plus interest, to Apple.
Three of my favourite topics feature in this issue of the Denton Briefing – tax, Bond and beer. But not necessarily in that order and not necessarily for the right reasons.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).