Business Restructuring - Comments on Germany and Proposal for the OECD

14 Pages Posted: 27 Mar 2009 Last revised: 11 Jan 2011

See all articles by Karin E.M. Dr. Kopp, LL.M. Berkeley

Karin E.M. Dr. Kopp, LL.M. Berkeley

Deutscher Juristinnenbund e.V.; Government of the Federal Republic of Germany - Bavarian Fiscal Authority, Tax Office Munich; Universität Hamburg - Interdisziplinäres Zentrum für Internationales Finanz und Steuerwesen (IIFS); Max Planck Institute for Tax Law and Public Finance

Date Written: April 30, 2008

Abstract

Cross border business restructuring involving commissionaire arrangements, toll-manufacturing and more generally transfer of risks and intangibles toward central locations within a Multi National Enterprise (MNE) group, have become widespread practice. That raises important treaty, transfer pricing and other tax issues. The OECD observes significant effects on countries' revenue base and the risk of double taxation faced by MNE groups. Key problem is that through business restructuring the state which allowed for an deduction of business expenses on the creation of (intangible) assets may not be able to tax the corresponding income (capital gains or current income) at a later stage. Germany, e.g., developed a vital interest in taxing those hidden reserves and adopted specific legislation through the German Corporate Tax Reform Bill 2008 which basically taxes a "transfer package" at the time of the transfer based on expected future gains. The article scrutinizes the German legislation 2008, investigates the comparability of the German provisions with international law and proposes a profit split approach to the OECD.

Keywords: business restructuring, shift of functions, price adjustment, Art. 9, Arm's-length, hidden reserves, permanent establishment, IRC 482, commensurate with income, transfer pricing, profit split, Germany, OECD, transparency, double taxation

Suggested Citation

Kopp, Karin E. M., Business Restructuring - Comments on Germany and Proposal for the OECD (April 30, 2008). Tax Notes International, Vol. 51, No. 3, 2008, Max Planck Institute for Intellectual Property, Competition & Tax Law Research Paper No. 09-05, Available at SSRN: https://ssrn.com/abstract=1361443

Karin E. M. Kopp (Contact Author)

Deutscher Juristinnenbund e.V. ( email )

undesgeschäftsstelle
Anklamer Str. 38
Berlin, 10115
Germany

Government of the Federal Republic of Germany - Bavarian Fiscal Authority, Tax Office Munich ( email )

Munich
Germany

Universität Hamburg - Interdisziplinäres Zentrum für Internationales Finanz und Steuerwesen (IIFS) ( email )

International Tax Institute
Sedanstraße 19
Hamburg, 20146
Germany

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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