Operating or thinking about expanding your business to Germany in the near future? Here are some recent German law changes that may affect you.
Understanding the German legal and regulatory environment
– and how it may change in the future – is just one
step to putting your new German business on the path to success.
Following are some recent German law changes that may affect
1. Lighter administrative and accounting burden for SMEs and
Under the so-called Bürokratieentlastungsgesetz
(BüroKrEntlG) Act, a company is now qualified as a SME
(Small-Medium-sized Entity) if its annual profit does not exceed
€60,000 (previously, €50,000) and if annual turnover
amounts to less than €600,000 (previously, €500,000).
This means that qualified SMEs are exempt from ongoing
requirements and interim reporting. Preliminary VAT returns, annual
tax returns and statutory financial statements still need to be
prepared within the legal time frames; however, less information is
required. Archive rules have also been relaxed.
2. Private persons must now use an IBAN for any and all
For the past two years, it has been mandatory for companies in
Germany to use an International Bank Account Number (IBAN), and now
private persons must also follow this rule to see their bank
payments successfully processed. However, a Bank Identifier Code
(BIC) is no longer required for any payments within the European
Economic Region (EU, Island, Liechtenstein and Norway).
3. Data protection requirements in Germany/the EU remain in a
state of flux
Following last year's European Court of Justice (EuGH) ruling that
the Safe Harbour rules did not offer enough protection for the use
of transferred personal data from EU citizens to the USA, the EU-US
Privacy Shield was agreed upon. However this new deal has been met with criticism that may affect its
scheduled June 2016 adoption. The ongoing debate around this issue
impacts each data transfer a business in Germany makes to the US,
and it should be appropriately monitored on a regular basis.
4. The fourth directive on money laundering and money transfer
The European legislator's fight against money laundering and
terrorist financing has never been stronger, and persons and
responsible entities falling under the German money laundering
regulations must obtain accurate information with regard to
identification of a contracting party, ultimate beneficial owner,
background of the business and financial transactions, and to
monitor and control these processes on a regular basis.
These measures make it possible to trace money flows and to
detect unusual or even suspicious transactions. Meantime the fourth
version of the money-laundering directive regulates cross-border
cases. Subsidiaries/branches must comply with local money
laundering rules in the host country.
5. CRS – Common Reporting Standards
German residents affected by CRS need to provide specific data
on their financial accounts to the German Federal Central Tax
Office. The first report will be filed for the 2016 fiscal year by
31 July 2017, and then annually by 31 July. Failure to comply with
CRS may result in a fine of EUR 50,000.
The German Act for Standard for Automatic Exchange of Financial
Account Information (FKAustG) came into effect on 31 December 2015.
The aim of the automatic exchange of financial account information
is to avoid cross-border tax fraud and evasion.
In a recently released milestone decision, the Swiss Federal Supreme Court held, for the very first time, that the duty of financial intermediaries to report suspicions of money laundering...
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