Germany plans to close tax loophole for foreign firms

Legislation calls for tightening rules that allow deduction of certain internal expenses

 Angela Merkel: the legislation is designed  to discourage firms from transferring patents, licences, concessions and market rights to other countries that either apply low taxes or none at all. Photograph: Hannibal Hanschke/Reuters

Angela Merkel: the legislation is designed to discourage firms from transferring patents, licences, concessions and market rights to other countries that either apply low taxes or none at all. Photograph: Hannibal Hanschke/Reuters

 

Chancellor Angela Merkel’s cabinet is expected to approve a measure on Wednesday to close a tax loophole used by foreign companies operating in Germany, according to legislation drafted by the finance ministry.

The legislation, which would still need approval by the German parliament, is expected to take effect from 2018 and result in €30 million in additional income for German federal, state and local governments, according to the draft.

The legislation calls for tightening rules that allow deduction of certain internal expenses to discourage firms from transferring patents, licences, concessions and market rights to other countries that either apply low taxes or none at all.

Germany’s move comes amid efforts by the Group of 20 industrialised countries and the Organisation for Economic Cooperation and Development (OECD) to combat licensing and patent loopholes.

– Reuters