UPDATE: At its meeting on 9 October 2020, the Federal Council adopted the recommendations of the Finance Committee not in its final statement. It is therefore unlikely that the ATAD reform (ATAD) will be implemented as proposed by the expert committee as part of the Annual Tax Act 2020.

In spring 2020, the Federal Ministry of Finance published a revised draft bill (dated 24 March 2020) for the implementation of the Anti-Tax Avoidance Directive ("ATAD").

https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/Abteilungen/Abteilung_IV/19_Legislaturperiode/Gesetze_Verordnungen/ATADUmsG/1-Referentenentwurf_2.pdf?__blob=publicationFile&v=2

This draft contained significant adjustments in the context of add-back taxation compared to the current legal situation. There was not much movement on this topic over the summer.
However, the implementation of the ATAD is now being driven forward by recommendations of the Federal Council committees (printed matter 503/1/20) from 28 September 2020. Accordingly, the ATAD requirements are to be taken into account in the form of a draft for the 2020 Annual Tax Act.

In the context of the add-back taxation of §§ 7 ff. AStG, there are the following significant changes compared to the previous draft bill:

- Confirmation of the replacement of national control with a shareholder-based control concept
- Confirmation of the precedence of the Investment Tax Act for income received by the foreign fund; however, the recommendations (due to the abolition of Section 14 AStG) still do not include any statements regarding investments held directly by the fund in low-taxed corporations. This could lead to an obligation to submit AStG declarations in the future
- Change in the low tax threshold from 25% to 15%
- The application of the regulations applies for the first time for the assessment period that leads to interim income at the intermediate company that arises after 31 December 2020.

It remains to be seen whether the corresponding recommendations (in particular the reduction of the low tax threshold to 15%) will ultimately also be incorporated into law.
The planned changes should already be taken into account for cross-border tax planning and appropriate measures should be examined in good time for existing structures.

Your TAXGATE team is always available to provide you with further information, particularly on cross-border investments.