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Germany

3 November 2021

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German Ministry of Finance Published Draft Ordinance Listing Non-Cooperative Jurisdictions for Defensive Measures

The German Ministry of Finance has published the draft ordinance providing the list of non-cooperative jurisdictions for the purpose of applying the defensive measures introduced as part of the Law to Prevent Tax Avoidance and Unfair Tax Competition and Amend Other Laws, which was approved on 25 June 2021. As previously reported, the defensive measures are designed to restrict individuals and companies from continuing or starting new business relationships with non-cooperative jurisdictions (tax havens), including restrictions on the deduction of expenses, stricter additional taxation rules for CFCs, exclusion from reduced withholding and exemptions, and others. The jurisdictions listed in the draft ordinance are based on the latest EU list of non-cooperative jurisdictions and include American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands, and Vanuatu.

Subject to final approval, the ordinance will enter into force the day after is published in the Official Gazette. The defensive measures generally apply in relation to the listed jurisdictions from the beginning of the calendar year after the year in which they were added to the ordinance, i.e., from 1 January 2022, assuming that the final ordinance is published before the end of the year. However, not all defensive measures apply immediately from the first year. In particular, it is provided that the measures limiting participation exemptions for dividends (distributions) and capital gains from the sale of shares apply from the third year after a jurisdiction is added and the measures limiting the deduction of business expenses apply from the fourth year. Certain "conflict of law" rules also apply, providing that certain defensive measures will not be applied if other defensive measures are applied.

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