246. New Tax Legislation: Overview.

Thomas Sauter, KPMG Frankfurt

For editorial cut-off date, disclaimer, and notice of copyright see end of this article.

The following tax bills were enacted into law in the latter half of 2001:

Act for the Curtailment of Illegal Employment in the Construction Industry (Gesetz zur Eindammung illegaler Betatigung im Baugewerbe) of 30 August 2001 (BGBl I 2001, 2267) - Illegal Construction Work Curtailment Act

Act Combating Value Added Tax Fraud and Amending Other Tax Laws (Gesetz zur Bekampfung von Steuerverkurzungen bei der Umsatzsteuer und zur Anderung anderer Steuergesetze) of 19 December 2001 (BGBl I 2001, 3922) - VAT Anti-Fraud Act

Act Amending Tax Provisions (Gesetz zur Anderung steuerlicher Vorschriften) of 20 December 2001(BGBl I 2001, 3794) - 2001 Tax Amendment Act

Act for the Further Development of Business Tax Law (Gesetz zur Fortentwicklung des Unternehmenssteuerrechts) of 20 December 2001 (BGBl I 2001, 3858) - Business Tax Development Act

1. Illegal Construction Work Curtailment Act

The Illegal Construction Work Curtailment Act creates a new 15 % withholding tax on payments for construction work made on or after 1 January 2002. Details are found in KPMG German News no. 1/2002 p. 25 = article no. 247.

2. VAT Anti-Fraud Act

The VAT Anti-Fraud Act defines a new crime of organised tax evasion punishable by imprisonment from one to ten years (new [section] 370a AO) and amends [section] 261 (1) sent. 3 of the Penal Code to punish concealment of illicit tax refunds from organised tax evasion by imprisonment from six months to five years.

Another noteworthy provision in this act disqualifies life insurance companies and health insurance companies from membership in tax consolidated groups for corporation tax purposes (new [section] 14 (3) KStG, effective as of the 2002 assessment period - [section] 34 (6) no. 3 KStG). It should be noted, however, that the Federal Council (Bundesrat) coupled its ratification of the 2001 Business Tax Development Act with a resolution calling upon the legislature to repeal this measure with retroactive effect. Such resolutions sometimes reflect informal agreements between the government and certain States in return for their votes on a specific bill (the Business Tax Development Act). Agreements of this sort are invariably honoured.

Finally, the VAT Anti-Fraud Act makes significant changes in VAT law. These are described in an article on new VAT legislation in KPMG German News no. 1/2002 p. 43 = article no. 250.

3. 2001 Tax Amendment Act

The 2001 Tax Amendment Act also makes significant changes in VAT law. These changes are also discussed in the article on new VAT legislation in KPMG German News no. 1/2002 p. 43 = article no. 250. Income tax aspects of the 2001 Tax Amendment Act are discussed in an article in KPMG German News no. 1/2002 p. 39 = article no. 249. The changes made by this act primarily affect individuals, but have impact on businesses or international investors in some cases.

4. Business Tax Development Act

The most important piece of legislation from the perspective of domestic and foreign business entities is the Business Tax Development Act, which is reviewed in detail in an article in KPMG German News no. 1/2002 p. 31 = article no. 248.

Editorial cut-off date: 20 March 2002

Disclaimer and notice of copyright

This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. KPMG Germany in particular insists that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note that the article is current only through its editorial cut-off date shown immediately above (not to be confused with the later date as of which the article was placed online - the date appearing at the article's outset). Related developments subsequent to the editorial cut-off are not necessarily reported on in later articles. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While KPMG Germany's articles are carefully reviewed, it can accept no responsibility in the event of any inaccuracy or omission. Any claims nevertheless raised against KPMG Germany on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Germany (KPMG Deutsche Treuhand-Gesellschaft AG). No use of or quotation from the article is permitted without full attribution to KPMG Germany and the article's stated author(s), if any. Distribution to third persons is prohibited without the express written consent of KPMG Germany in advance.

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