Germany published the Withholding Tax Relief Modernization Law in the Official Gazette on 8 June 2021, which includes measures to simplify and streamline relief procedures, the digitization and centralization of procedures, and the improvement of anti-treaty abuse (treaty shopping) rules. With respect to treaty abuse in particular, a revised rule is introduced to comply with EU law and adopt certain aspects of the ATAD GAAR. The revised rule provides that a foreign company, partnership, or other taxable entity will not be entitled to claim any withholding tax relief under a treaty if:
However, it is provided that the restriction on withholding tax relief will not apply if it can be proven that none of the main purposes of the interposition of a foreign company, partnership, or other taxable entity is to obtain a tax advantage, or its shares are materially and regularly traded on a recognized stock exchange.
Aside from the measures related to withholding tax, the law also includes updated transfer pricing rules considering the outcomes of BEPS Actions 8-10 and other changes, including:
Note that the German authorities already generally apply the BEPS outcomes in practice, which are now formally incorporated into law.
The law is generally effective on the day following publication, i.e., on 9 June 2021. However, certain other changes regarding family relief and beer tax are effective from 1 January 2021, certain changes regarding relief for international organizations are effective from 1 January 2022, and certain changes regarding insurance for employees are effective from 1 January 2024.