German Rules
The CFC provisions in Germany (ยงยง 7-14 AStG, Foreign Tax Act) apply to both individual and corporate shareholders of a controlled foreign company. Such shareholders must include in their currently taxable income as a deemed dividend their share of passive income if two tests are met:
- German residents control the non-German corporation and
- That corporation is taxed at a rate of less than 25% on the passive income.
Control in this case is ownership by all German residents of more than 50% of the vote or capital of the foreign corporation. Such ownership includes both direct ownership and ownership through related persons. In determining the 50% threshold, all German residents are considered, even those owning very minor amounts.
Passive income is all income which is not active income, as extensively defined. Active income, however, excludes income where there has been substantial assistance by a German related party in earning the income. Active income also excludes all income of a foreign corporation lacking sufficient substance. Generally, passive income resembles U.S. Foreign Personal Holding Company Income discussed above. However, deemed dividends may be exempted under some treaties.
Read more about this topic: Controlled Foreign Corporation
Famous quotes containing the words german and/or rules:
“I have known a German Prince with more titles than subjects, and a Spanish nobleman with more names than shirts.”
—Oliver Goldsmith (1728–1774)
“Never invite to dinner: those who won’t decide until the last minute; those who come more than half an hour late; those who want to bring along two or three friends; drunks; monologists; those who stay until three o’clock in the morning; those who think that conversation means having an argument; those who take a high moral tone; those who are stupid, ugly, or dull. Enforcement of these rules will enable one to eat alone every night in comfort.”
—Mason Cooley (b. 1927)