Competitive tax framework conditions are a key condition for making Germany an attractive site for the automotive industry. Germany faces significant competition from growing production abroad and from internationalization. The VDA focuses on dealing with the following topics regarding a tax policy favorable to growth and with an international focus:
• prevent tax increases and double taxation risks
• flank innovations and new technologies, such as electromobility, with taxes
• improve tax framework conditions for research and development
• simplify taxes and increase planning and legal safety
International tax policy
Combating a shift abroad of profits to the detriment of taxes is a major tax policy profit of the OECD, the G20 states and the German Federal Government in its 18th election period. The aim is to prevent artificial shifts of profits. In particular, cross-border information transfer between the tax authorities of the different states should be improved. A new international standard is being developed, which results in an automatic transfer of information. In addition, existing regulations relating to double taxation agreements, transfer prices and operating sites are to be amended: Profits are to be taxed where the actual economic activity took place.
The OECD initiative for fair international tax competition, the so-called BEPS Action Plan, contains the risk of competitive disadvantages for German companies from the perspective of the automotive industry. Possible measures, such as a restriction to the deduction of license fees as operating expenses, would put Germany as a high-technology site at risk and would mean a disproportionate tax strain on common economic activities. In addition, the new transfer price documentation results in high administrative costs for companies.
Effective tax rate on license revenues
Regular tax rate
Year of introduction
|Switzerland, Nidwald Canton||8.8||20.60||2011|
|UK||10||24 (from 2012: 22)||2012|
The stronger international competition for sites further creates an increasing need for action to help the research and development activities of companies in Germany with targeted tax support – such as through tax support for research or by introducing a patent box. Most other EU states allow tax reductions for license revenues. Germany as a high-technology country must not be disadvantaged in this area.
Inheritance tax – favorable treatment of operating assets under review
On December 17, 2014, the German Federal Constitutional Court ruled that current inheritance tax law is partially anti-constitutional. The exclusion of operating assets as such from inheritance tax remains constitutional, but corrections are required where large company assets are transferred.
Now, it is up to the legislator to redesign inheritance tax law with regard to the exclusion of operating assets to make it constitutional by June 30, 2016. The automotive industry with its numerous large companies and strong medium-sized family enterprises – particularly in the automotive supply area – is particularly strongly affected by these reform considerations. The German Federal Government has announced that it does not intend to increase the overall financial costs of inheritance tax. The favorable treatment of transferred operating assets in line with the German Constitution will be kept. A proposal for a design of the exclusion rules for operating assets in line with the German Constitution is being developed.
The VDA welcomes that the Federal Government wants to limit the current reform considerations to the minimum adjustments required legally. In light of protecting family companies and jobs, operating assets must also be excluded from inheritance tax in the future. New requirements regarding an exclusion of large companies must be practicable and take account of the special characteristics of family companies. A new provision of inheritance tax law must not lead to higher charges when transferring a company to the next generation.
Reform of the option to report oneself to avoid fines
The possibilities for avoiding punishment by voluntary disclosure in the event of tax evasion were restricted in 2015. The aim is to consistently combat tax evasion. In the future, the option to report oneself to avoid fines (§ 371 of the German Tax Code) will only be possible up to the tax evasion amount of 25,000 euros. Previously, this had been 50,000 euros. From this tax evasion amount, and in particularly serious cases of tax evasion, criminal prosecution can only be avoided if a surcharge is paid at the same time. For simple tax evasion, the limitation period will continue to be five years, but the adjustment period will be extended to at least ten years. Previously, in the case of simple tax evasion, taxpayers were only obligated to provide explanations for the five-year period of limitation for criminal prosecution.
For companies, the legal clarification whether corrections to tax self-assessments and tax returns will remain exempt from punishment is particularly important. In the interests of legal safety, the VDA has expressed this repeatedly to politicians and administration. This has now been clarified regarding advance tax returns for VAT and wage tax self-assessments, and a so-called partial self-assessment remains possible (exemption from the completeness requirement of § 371 (2a) of the German Tax Code). This at least creates legal safety regarding tax self-assessments.
Recognition of development costs
The topic “Recognition of development costs” is increasingly becoming a topic for tax audits – primarily in the automotive supply area. Tax audits question the recognition impact in the profit and loss account of development costs. According to the tax authorities, companies using serial production should in many cases increasingly be subject to contract research and development, which must be capitalized. The so-called “Letter of Intent” is in many cases already treated as a placing of orders.
For years, the VDA together with the Federation of German Industries (BDI) has lobbied the Federal Ministry of Finance to allow development costs to be recognized in the profit and loss account. Especially for the research-intensive companies of the supply industry, which were previously allowed to recognize research and development costs in the profit and loss account, a lack of tax recognition of R&D costs results in a significant disadvantage for the sites. As a result, the framework conditions of R&D costs are thus exacerbated indirectly, which is not acceptable given the continual increase in competition between sites. It should thus be made clear that the capitalization prohibition according to § 248 (2) HGB or § 5 (2) of the Income Tax Act (EStG) continues to apply to development costs and that these costs can be recognized in the profit and loss account.
Tax framework conditions for electric vehicles
In order to increase acceptance of electric vehicles in Germany, the VDA is supporting the introduction of special 50-percent depreciation for commercial electric vehicles in their year of purchase. For many years, special depreciation has been a tried-andtested market tool for creating investment incentives. In its “Progress report for 2014 – Taking stock of market preparation,” the National Platform for Electromobility (NPE) recommends the introduction of special depreciation for commercially used electric vehicles. The Federal Ministry of Economics’ “National Action Plan” agreed by the Federal Cabinet on December 3, 2014, and the Federal Ministry of the Environment’s “Climate Protection Action Plan 2020” provide for such special depreciation.
According to first calculations, the effects of such special depreciation for electric vehicles on taxes will remain limited: Depending on the new registrations accepted and the average purchase price, special depreciation for electric vehicles will reduce total annual tax income for year by only 0.2 billion euros. In the year in which it is introduced, tax income would fall by only around 30 million euros.
Natural gas vehicles – extension of the energy tax reduction
The coalition agreement for the 18th election period states that the energy tax reduction for climate-friendly liquefied gas and natural gas would be renewed until the end of 2018. Now, this stipulation, which is of key importance for the further development of the market for natural gas vehicles, must be implemented in law. If the energy tax reduction is not renewed, this would reduce incentives to buy a natural gas vehicle. Given the life cycle of natural gas vehicles of up to 15 years, vehicle manufacturers and their customers need a clear perspective beyond 2018 as early as possible. In light of the investment safety required for buying natural gas vehicles, the VDA supports the renewal of this tax deduction. Joint initiatives with other associations also speak out for a timely ratification by law. The proportion of 20 percent of regeneratively produced methane in natural gas already achieved today (largely from waste materials) plus the 24 percent from the fuel chemicals industry compared to petrol and diesel could – if the tax deduction is renewed until 2026 – already result in total savings of around 1.7 million tons of CO2 emissions a year.
Company car tax – achieving system-compatible tax
Politics repeatedly offers suggestions for new tax rules for company car tax. Tax on the monetary benefit from the private use of official and company cars should, e.g., be based on ecological aspects. The VDA is expressly against such tax on the private use of official and company cars based on ecological aspects. The current tax on the private use of official and company cars based on the 1-percent rule or total cost method (driver’s log method) is systematically correct and has been tried and tested in practice. This was also confirmed by the Bundestag’s Financial Committee as a result of its hearing on November 7, 2012, and an ecologization of official and company car tax was not pursued further. An ecological focus of company car tax would lead to system-incompatible faults in tax law. Environmental requirements for cars should not be part of income tax law. The EU passenger vehicle CO2 regulation is the administration law for lowering CO2 emissions. This already sets out highly ambitious CO2 requirements.