We also specialize in providing tax and financial advice in the context of restructurings as well as sales and acquistions of companies (M&A tax). Therefore, we are the right partner for US companies and individuals with connections to German tax law planning to sell or restructure their business or that intend to acquire a German business. Very often, there is considerable (tax) optimization potential in Germany in these constellations, which we would like to leverage together with our clients.
Our services in the field of M&A tax include tax due diligences, tax advice on the structuring and financing of transactions, and support in negotiating tax clauses. We also assist with finance issues and purchase price negotiations. We provide these services to strategic investors and to financial investors.
For a US company doing business in Germany, there are several key tax considerations to keep in mind:
Corporate Income Tax: The standard corporate income tax rate in Germany is 15% (plus a solidarity surcharge of 5.5% on top of the corporate income tax). The additional German trade tax rate depends on the place where a PE is located in Germany and starts at 7% (average 14% to 15%).
VAT: In Germany, companies are required to charge VAT on their sales and may be able to claim back VAT paid on business expenses. The standard VAT rate in Germany is 19%, with reduced rates of 7% and 0% available for certain goods and services.
Transfer Pricing: If a US company has a subsidiary or branch in Germany, it must comply with transfer pricing rules. This means that transactions between the US company and its German subsidiary or branch must be conducted at arm’s length to ensure that profits are allocated appropriately.
Withholding Taxes: In some cases, a German withholding taxes can apply. For example, if a German company is paying dividends to shareholders in the US, it may be required to withhold a certain percentage of the dividend payment and remit it to the German tax authorities.
Permanent Establishment: A US company with a presence in Germany may be subject to German tax on its profits earned in Germany, even if the company is not incorporated in Germany. This is known as having a permanent establishment in Germany, and it can have significant tax implications.
Double Taxation: The US has a tax treaty with Germany to avoid double taxation. This means that US companies doing business in Germany may be able to offset German taxes paid against their US tax liability.
Compliance: It’s important for US companies doing business in Germany to comply with all applicable tax laws and regulations. Failure to do so can result in penalties, fines, and legal issues.
Overall, it’s important for US companies doing business in Germany to have a thorough understanding of German tax laws and regulations. Working with a German tax lawyer who is familiar with the tax landscape in both countries can help ensure compliance and minimize tax liability.