On 3 May, 2012, the German federal government submitted a legislative draft of an act for the amendment of the German Insurance Premium Tax Act and the German Motor Vehicle Tax Act (Verkehrsteuerungsänderungsgesetz – VerkehrStÄndG). This draft act is the legislator’s reaction to losses in tax revenue from specific product structures (so-called insurance packages) as well as certain judgments by the Federal Tax Court, which were not decided in favor of the German tax authorities (Decision on the expiration of the accessory statute of limitations of the indemnitor and the Decision on deductibles under motor vehicle liability insurance). In addition, the draft act introduces administrative relief for insurance companies. The amendments should enter into effect on 1 January 2013, such as the possibility of an annual insurance premium tax filing.

The German Federal Cabinet passed the government's legislative draft of the 2013 Annual Tax Act on May 23, 2012. The Federal Council's position statement is expected on July 6, 2012. The Federal Council's position statement is based on recommendations by its Committees issued on June 22, 2012. It is planned to introduce tax liability for income from hybrid financial instruments as well as tax liability for dividends and capital gains on profit sharing of widely held stock (<10%). Our Client Newsletter informs you of the details of these two new reforms prior to the Federal Council's resolution. In particular, the corresponding effective dates allow little room for maneuver.

In this client newsletter we address the current tax treatment of the transaction cost portion of the so-called all-in fee by the German tax authorities. 

In addition, this further supports the industriy's efforts to also have the acceptance of a separate transaction cost deduction included in the amendment to the decree of the application of the investment income flat tax.