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. 

The German Federal Fiscal Court recently held that a treaty override by German tax law may be unconstitutional. The court believes that national laws may not override double tax treaties unless there is a justifiable reason. This recent decision is in direct contradiction with past legal tradition.