In early August, the German government passed draft legislation to prevent VAT losses on trade in goods on the internet and to amend other tax rules and regulations. The preliminary technical drafts for this legislative project carried the working title "Annual Tax Law 2018". This "Annual Tax Law" is intended to implement professionally required and necessary changes in tax law. These also include, among others, the amendments to the Investment Tax Act, which we will examine below (for more information on the planned tightening of inbound real estate investments, please see our beinformed dated July 31, 2018).

On 21 June 2018 the German Federal Ministry of Finance has published the Draft Annual Tax Act 2018. If so enacted, capital gains on the sale of shares in real estate rich companies that own German properties will become subject to German tax. In particular, foreign investors are impacted by this new law.

Only half a year after the 2007 version of Section 50d (3) of the German Income Tax Act was declared as unlawful by the European Court of Justice (see our beinformed dated February 14, 2018), the current version has also suffered the same fate. As an anti-treaty-shopping rule, Section 50d (3) German Income Tax Act prevents, under certain conditions, exemptions or refunds of withholding taxes on dividends paid by German subsidiaries to their European parent companies. The European Court of Justice already decided on December 20, 2017, that the 2007 version of the Section 50d (3) German Income Tax Act violates both the Parent-Subsidiary Directive and the freedom of establishment (joint cases C 504/16 “Deister Holding” and C 613/16 “Juhler Holding”). On June 14, 2018, the European Court of Justice reached the same conclusion (C 440/17) with regard to the provision’s current version.