International Tax Highlights with PricewaterhouseCoopers on Non-Resident Taxation Challenges

Expert Webinar: Current German Tax Challenges for Non-Resident Taxpayers – To Register or Not to Register?


As part of the jointly-organized bi-annual event series “International Tax Highlights,” AmCham Germany hosted a virtual Expert Briefing in cooperation with Patron Member PricewaterhouseCoopers GmbH on April 21, 2021. To kick off the webinar entitled “Current German Tax Challenges for Non-Resident Taxpayers – To Register or Not to Register,” tax expert Christof Letzgus, Partner at PwC Germany in Frankfurt, virtually welcomed a diverse audience of AmCham Germany members as well as other interested participants. He provided in-depth information on the tax liquidity risks resulting from a recent discussion on the application of German non-resident taxation rules to extraterritorial fact patterns and even to cases without a German taxation right under international taxation rules and applicable Double Tax Treaties. Mr. Letzgus, who also co-chairs AmCham Germany’s Tax Committee, was joined by his colleagues from PwC Germany including Dr. Annette Rickert, Senior Manager; Christoph Richter, Senior Manager; and Felix Hierstetter, International Tax Director at General Electric Deutschland Holding GmbH and Chair of AmCham Germany’s Tax Committee.

After providing introductory remarks on “classical” cases of non-resident taxation which show a genuine economic link either through a taxable presence or through an outbound payment from Germany, the speakers discussed the background for the new position of the tax authorities claiming German withholding taxes on royalty payments between non-German parties where the only link to Germany consists in a registration of rights in a public German register. In doing so, they refer to a decade-old provision in the tax code which had not been applied to these extraterritorial cases in the past. The panelists took a closer look on practical implications and addressed critical questions while utilizing sample case studies reflecting the current status of the discussion and the current approach of the tax authorities. Furthermore, when considering the determination of tax basis, three main transfer pricing approaches were discussed. The presentation concluded by addressing procedural considerations.

The webinar concluded with a panel discussion and outlooks for the future. According to the speakers, the best approach would be to follow the recommendation of the Federal Ministry of Finance in a Draft Bill presented in late 2020 and to repeal the rule and its even more controversial extraterritorial application to the highlighted “registered rights” cases altogether. Since this proposal has not been implemented at this time, taxpayers and tax authorities need to work on practical approaches which differ in each individual case.

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Thomas Henneberg

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