LexisNexis - что можно взять полезного?

[Гость горЕ]

Получил в подарок 20 дневный доступ в lexis и хотел бы использовать эту возможность к всеобщему благу.

Нет ли у кого идей, что можно было бы оттуда взять для размещения на нашем сайте, форуме или базе?

[Гость горЕ]

Что, неужто никто не в курсе о этой системе?

Сайт их здесь- www.lexis.com

[Гость Tontarius]

Ну а что же можно выбрать из трёх милиардов документов?

За двадцать дней и содержание не прочитаешь!

Предлагаю: "Казахстан -глазами запада", т.е.

1. профиль страны;

2. небольшой анализ законодательства и рынка;

3. Список неблагонадёжных и благонадёжных фирм.

4. Рекомендательный анализ

[Гость горЕ]

А какой раздел имеете в виду?

Legal (excluding U.S.)

Country & Region (excluding U.S.)

Это-Duns Market Identifiers - Kazakhstan?

[Гость горЕ]

Надыбал, раздел где много налоговых конвенций есть, на английском правда, но думаю для базы не повредит :mad:

[Гость Askar]

Переведем на русский (если нужно).

Главное чтобы было что :mad:

[Гость горЕ]

А в связи с последним предложением- не замахнуться ли нам на Вильяма, понимаете, нашего, Шекспира (©Берегись автомобиля)

В смысле есть такой Digital Millenium Act или Закон об авторских правах в цифровом тысячелетии США, по которому программиста Склярова замели.

Английский текст есть, а вот русского нигде найти не могу :mad:

[Гость Tontarius]

А какой раздел имеете в виду?

Legal (excluding U.S.)

Country & Region (excluding U.S.)

Это-Duns Market Identifiers - Kazakhstan?

Доступ то у Вас! Вам и решать.

А мы снаружи.......

[Гость горЕ]

Ну вот скажем такие вещи насколько могут быть полезны?

GERMANY

September 26, 2001

LENGTH: 70862 words

SUBJECT: orporate tax in depth study

GERMANY

This chapter is based on information available up to

9 July 2001.

See Tax News Service for any later developments.

TRANSFER PRICING

New guidelines for the cooperation and documentation requirements in

transfer pricing to be prepared

The Federal Ministry of Finance is currently preparing new guidelines

for the cooperation and documentation requirements in transfer pricing.

According to the unofficial draft of these guidelines, the

documentation requirements will be especially extended for documents

stemming from foreign affiliates. The draft guidelines emphasize that,

before entering into any transaction with foreign affiliates, the

German taxpayer has to agree with the foreign affiliate that they will

provide all necessary information for the control of transfer pricing.

The German taxpayer thus cannot argue that he could not get hold of

foreign documentation.

Without specific request of the tax authorities, the German taxpayer

would have to provide a group chart, the transfer pricing policy, a

list of all transactions with related parties (separately per year and

per related party) and documents which have been prepared for foreign

tax authorities. Furthermore, the draft guidelines contain a detailed

list of documents that the German tax authorities can require (market

studies, customs audit reports, insurance documents, customer

information, minutes and agendas of board and directors' meetings,

etc.).

Guidelines on the treatment of expenses for seconded employees

The Federal Ministry of Finance has issued a draft ordinance regarding

the tax deductibility of expenses linked to the secondment of

employees.

The remuneration borne by a German company for a foreign seconded

employee and the compensation received by a German company for the

secondment of a German employee to a foreign affiliate have to comply

with the arm's length principle.

The deduction for expenses is excluded to the extent that the seconded

employee works in the interest of the parent company of the group

(stewardship expenses).

There are three basic methods proposed for the determination of the

arm's length compensation:

(1) The internal comparison compares the salary borne for the seconded

employee with the remuneration that the company would have had to

bear for a comparable local employee.

(2) The external comparison focuses on the remuneration that an

independent company would be ready to bear for a comparable

employee.

(3) If an internal or external comparison is not possible, a

hypothetical comparison is to be made. The hypothetical comparison

examines whether a prudent and diligent business manager would

have accepted to bear the total cost for the seconded employee or

whether he would have asked a participation from the foreign

seconding affiliate. The draft ordinance states that a prudent and

diligent manager would only accept to bear the additional

compensation that is normally due in secondment cases if he can

expect a reasonable return on those increased expenses.

If the arm's length test is not met, the tax authorities assume that

the excessive part of the expense is not deductible even if the

employee has worked full-time for the receiving company. The tax

authorities assume in this case that a part of the remuneration serves

the seconding company since they will benefit from the experience that

the seconded person has achieved, once the employee is back in his home

country.

A profit mark-up on the secondment compensation is not admitted.

A safe haven rule is provided for cases where the same position is

always occupied by the secondment of an employee by the same company in

a rotation system. The tax authorities agree not to audit the

remuneration in detail, if the seconding company bears 20% of the

compensation. The safe haven is only valid if it is applied to all

employees that are sent to, or coming from, a specific country.

TAXATION OF COMPANIES

IN GERMANY

Ines Leffers

Wirtschaftspr fer/Steuerberater

WEDIT Deloitte & Touche

D sseldorf

1. BUSINESS ENTITIES

1.1. General

German company law offers a variety of business forms, distinguishing

two categories: (i) companies (incorporated businesses) and (ii)

partnerships (unincorporated businesses). The choice between a company

and a partnership is based on various factors, such as limitation of

liability, minimum capital requirements and tax treatment.

The main differences between companies and partnerships are;

- companies provide for limited liability of their shareholders,

whereas partnerships generally require unlimited liability of the

partners. For the possibility of having limited liability in a

partnership, see 1.2.4.;

- companies are required to have a certain minimum share capital due

to their limited liability. This is not necessary for partnerships

since the creditors can be satisfied with the property of the

partner who has unlimited liability;

- companies have a distinct legal personality (and are taxed at

their level, see 2.), whereas partnerships have only a "partial

legal personality". Partnerships may, for example, acquire

immovable property, conclude contracts, etc. Partnerships,

however, are transparent, i.e. their profits and losses are

attributed directly to the partners for both civil law and tax law

purposes.

The basics of German company law are laid down in the Civil Code

(B rgerliches Gesetzbuch, BGB) and completed by special statutes for

the different types of entities:

- Stock Company Law (Aktiengesetz, AktG) for stock companies

(AG);

- Limited Liability Company Law (Gesetz betreffend die

Gesellschaften mit beschr nkter Haftung, GmbHG) for limited

liability companies (GmbH); and

- Commercial Code (Handelsgesetzbuch, HGB) for partnerships.

Regardless of the business form, a new business must register with the

local trade office (Gewerbeamt) and the tax authorities.

1.2. Forms of business organization

The two forms of German company with limited liability are the stock

company (Aktiengesellschaft, AG) and the limited liability company

(Gesellschaft mit beschr nkter Haftung, GmbH). The shares of an AG

can be traded on the stock exchange upon application and following the

publication of a prospectus (stock company); the shares of a GmbHmay

not (limited liability company). Due to the possibility that its shares

may be publicly traded, the AGis subject to more formal

requirements, whereas the GmbHis more flexible. The GmbHis,

therefore, the company form most favoured by residents and

non-residents, except where funds are to be raised on the stock

exchange. For a discussion on the differences between Ags and GmbHs,

see 1.2.2.1.

The main forms of unincorporated businesses are the commercial

partnership, i.e. the general partnership (OHG) and the limited

partnership (KG). For details, see 1.2.4.

Between the stock company (AG) and the limited partnership (KG) is

the rarely used limited partnership with shares (KGaA) (see

1.2.1.5.).

1.2.1. Stock company

1.2.1.1. General

The provisions applicable to stock companies (Aktiengesellschaft, AG)

are laid down in the Stock Company Law (AktG) of 6 September 1965. It

regulates the rights and duties of AGs and their shareholders,

especially the rights of the shareholders versus those of the

management, the control of management, etc.

The AGis defined as an association (see 1.2.6.) with an

independent legal personality whose capital is divided into shares

(Sec. 1 AktG). The AGis intended as the corporate business form

for larger business enterprises because it gives access to fund-raising

via the stock exchange. Some changes to the Stock Company Law

introduced in 1994 are designed to make the AGmore attractive for

medium-sized businesses (e.g. reduction of the minimum share value from

DEM 50 to DEM 5, the possibility to create an AGwith only one

shareholder, simplification of some formal requirements).

The shareholders of an AGmay be individuals or legal entities. The

AG's creditors have recourse only against the company's assets, and

the shareholders' liability is normally limited to the amount of their

contribution to the share capital (Secs. 1 and 54 AktG).

The AGhas three management and control instruments: (1) the

management board, (2) the supervisory board and (3) the general meeting

of shareholders. In contrast to the Anglo-American system, for example,

a two-tier board, consisting of a management board and a supervisory

board, is compulsory for the AG. Thus, there is no board of directors

combining executive and supervisory functions at the same time.

The management board is responsible for operating the company (Sec.

76(1) AktG), preparing the annual financial statements, filing the

statements at the Commercial Register (Handelsregister) and publishing

the certified financial statements. The management board consists of

one or more members (Sec. 76(2) AktG) and represents the company

versus third parties (Sec. 78 AktG). The members of the management

board are appointed by the supervisory board for a maximum period of 5

years (Sec. 84 AktG), which is renewable for other periods of 5 years

upon decision of the supervisory board.

The management board (Vorstand) must report to the supervisory board

quarterly on the company's turnover and situation (Sec. 90(1) No. 3

AktG). At least once a year, the management board must inform the

supervisory board of the planned business policy and other basic issues

concerning the future management, as well as of the company's

profitability (Sec. 90(1) Nos. 1 and 2 AktG). The management board

must inform the supervisory board of all planned transactions which can

be of substantial importance for the company's profitability, liquidity

or general situation at an early stage so that the supervisory board

can comment on the transactions before they are carried out (Sec. 90(1)

No. 4 AktG).

If the year-end balance sheet or any interim balance sheet shows that

the company's losses have reached half of the company's share capital,

the management board must convene the general shareholder's meeting and

inform it of the situation (Sec. 92(1) AktG). If the company becomes

unable to pay its liabilities or if the value of the liabilities

exceeds the value of the assets, the management board must initiate

bankruptcy proceedings (Sec. 92(2) AktG). Members of the management

board are personally liable if they do not execute their duties with

sufficient care (Sec. 93 AktG).

The supervisory board (Aufsichtsrat) is responsible for supervising the

management board (Sec. 111(1) AktG). The articles of incorporation

can provide that certain operations may be carried out only with the

consent of the supervisory board, but the board may not actively engage

in the company's management (Sec. 111(4) AktG). Members of the

supervisory board are not allowed to be at the same time members of the

management board (Sec. 105 AktG). The supervisory board appoints the

managing directors and the certified auditor. The members of the

supervisory board are elected by the general shareholders' meeting

(Sec. 101 AktG). The supervisory board consists of 3 or more members

(always divisible by 3), with a maximum of 9, 15 or 21, depending on

the share capital (Sec. 95 AktG). The supervisory board must meet at

least every 6 months, but should meet once every 3 months (Sec. 110

AktG). Labour representation is prescribed by different labour

representation laws. In companies with at least 500 employees, one

third of the supervisory board needs to represent employees. In

companies with more than 2,000 employees, at least 50% of the members

need to represent employees, and 50% represent the employer.

Nevertheless, the employers normally have the greater power because the

employee side must include at least one high level employee who might

favour the employer's opinion and the president of the supervisory

board is normally a representative of the employer side. He has two

votes in case of a deadlock.

The shareholders exercise their rights in shareholders' meetings

(Hauptversammlung), which are called by the management board (Sec. 121

AktG) or, in exceptional cases, by the supervisory board (Sec. 111(3)

AktG). The shareholders' meeting decides on important matters, such

as the appointment of the supervisory board, the use of the profit, the

discharge of the management board and supervisory board, changes in the

articles of incorporation, increases/decreases in the capital and the

audit of specific management transactions (Sec. 119(1) AktG). The

shareholders' meeting cannot, however, decide on questions of

management, unless the management so requires (Sec. 119(2) AktG). The

minutes of a shareholders' meeting must be certified by a notary if the

company is listed on a stock exchange. A simple majority is normally

sufficient for decisions, unless the articles of incorporation or the

law provides for a greater majority in a specific case. The law

provides for a three-quarters majority mainly for important issues,

such as the increase or decrease in capital, mergers, liquidations and

the conclusion of profit-and-loss pooling agreements (see 9.1.).

The financial statements of an AGmust be audited by a certified

chartered accountant if the AGexceeds at least two of the three

following criteria (Secs. 316 and 267 HGB):

- balance sheet total: DEM 6,720,000;

- turnover: DEM 13,440,000; and

- employees: 50.

Regardless of the size of the AG, the financial statements (for

non-audited AGs: only the balance sheet and the notes) must be

deposited with the Commercial Register. Those of AGs of a certain

size must be published in the Official Gazette (Sec. 325 HGB).

Under the Works Council Law, employees have the right to establish a

works council if the company has more than five employees. The works

council represents the employees before the employer and has certain

rights concerning new employment contracts and dismissals.

1.2.1.2. Capital

Due to the introduction of the euro, the AktGcontains both

Deutschmark and euro values for the minimum share capital and the par

value of shares. The Deutschmark values in the balance sheet must be

converted to euros when the euro is definitely introduced on 1 January

2002. This will usually not result in a round figure. The company may

keep the converted amount or adapt it to a "round" euro figure by an

increase or decrease in the capital. Stock companies that are newly

founded and registered during the transitional period from 1 January

1999 through 31 December 2001 may choose to use either the Deutschmark

or euro values. From 1 January 2002, the euro values are obligatory.

The minimum share capital (Grundkapital) of the AGis DEM 100,000

(EUR 50,000) (Sec. 7 AktG). The minimum par value per share is DEM 5

(EUR 1). The shares need not necessarily carry the denomination of the

par value (Nennwertaktie). It is also possible to mention in the

articles of incorporation exclusively the number of shares issued for

the share capital (at least one share for one euro; St ckaktie). The

advantage of shares without a specific par value is that the share

capital and the number of shares can be changed separately, without a

change in one affecting the other. For example, an increase in the

share capital does not necessitate the issue of new shares if they do

not mention a specific nominal par value. The stock company must

attribute 5% of the annual profit to the legal reserve until the

reserve reaches 10% of the share capital (Sec. 150 AktG).

The share capital (Grundkapital) must be fully subscribed before

incorporation. On subscription, at least 25% of the par value of shares

must be paid up (DEM 25,000/EUR 12,500) plus the entire premium (Sec.

36a(1) AktG) if issued for cash. Otherwise, the AGcannot be

registered. Changes to the AG's capital structure require an

amendment to the articles of incorporation and usually a three-quarters

majority in the shareholders's meeting. Each shareholder's liability is

limited to the unpaid portion of the par value of his shares. If the

AGis founded with contributions in kind (Sacheinlagen), a formation

audit (Gr ndungspr fung) by an independent certified public accountant

is mandatory (Sec. 33(2) No. 4 AktG). Contributions in kind must be

transferred to the company within 5 years of registration (Sec. 36a(2)

AktG).

Shares may be issued at a premium (agio). They may not be issued below

par value. Shares can be issued in the form of registered shares

(Namensaktie) or bearer shares (Inhaberaktie). Registered shares,

however, are compulsory for shares not fully paid up (Sec. 10(1) and

(2) AktG). The articles of incorporation may provide that the

transfer of the shares requires the prior consent of the AGor the

shareholders (vinkulierte Namensaktien).

Ordinary and preference shares are recognized under German law. An AG

may acquire its own shares for consideration under certain

circumstances (resale to employees, reduction of capital). The

aggregate nominal value of shares acquired may not exceed 10% of the

total nominal share capital (Sec. 71 AktG).

No notarial deed is required for a transfer of shares in an AG.

Bearer shares are transferred by simply handing them over. Registered

shares must be signed over (Indossament) to the new owner.

The Stock Company Law does not require debt/equity ratios. For the tax

rules on thin capitalization, see 13.3.

1.2.1.3. Formation

An AGcan be formed by one or several shareholders (Sec. 2 AktG).

The founders may be resident or non-resident, of German or foreign

nationality, individuals, legal entities, general partnerships (OHG)

or limited partnerships (KG).

The formation procedure of a stock company (AG) is regulated in

greater detail and is more costly than that of a limited liability

company (GmbH). This is because the AGis intended for the general

public, which must be protected by various provisions.

The formation of an AGis done in nine steps:

- drawing up an agreement on the articles of incorporation. The

agreement must be signed by all the founders and certified by a

notary (Sec. 23 AktG);

- subscription of all the shares (Sec. 29 AktG);

- appointment of the first supervisory board and auditors by the

founders. The supervisory board, in turn, appoints the first

management board (Secs. 30 and 31 AktG);

- payment of at least 25% of the cash contributions. Contributions

in kind must be transferred to the company within 5 years of

registration;

- drawing up a report on the company's formation (Sec. 32 AktG).

The report must be signed by all the founders;

- audit of the formation by a certified accountant, mainly in two

cases where:

(a) a member of the management board or the supervisory board is

a founder; or

(b) the capital contribution consists of a contribution in kind

(Sec. 33 AktG);

- application for registration in the Commercial Register

(Handelsregister) at the local court of the AG's seat;

- examination of the formation by the local court; and

- registration of the AGin the Commercial Register. At this

stage, the AGlegally exists.

The formation is subsequently published in the Official Gazette

(Bundesanzeiger).

The articles of incorporation must specify:

- the name and seat of the company;

- the purpose of the company;

- the amount of the share capital;

- the nominal value of shares, the number of shares, the different

classes of shares, whether the shares are bearer shares or

registered shares; and

- the number of members of the management board (Sec. 23(2) AktG).

The notary fees, registration duties and fees for the official

publication of the AG's formation depend on the par value of its

share capital. For an AGwith a share capital of DEM 100,000 (minimum

share capital, see 1.2.1.2.), the total fees normally add up to

around DEM 2,500. There are no taxes, e.g. capital duties, on the

formation (see 12.).

1.2.1.4. Liquidation

A stock company is dissolved for the following reasons (Sec. 262

AktG):

- expiration of the lifetime provided for in the articles of

incorporation;

- decision of the shareholders (a three-quarters majority of the

share capital represented at the meeting is necessary);

- initiation of bankruptcy proceedings or a court order denying such

proceedings due to lack of funds to cover the costs of the

proceedings; or

- court decision if the articles of incorporation contain severe

legal deficiencies.

Furthermore, the company can be dissolved on the occasion of a merger

(see 1.4.2.) or a division (see 1.4.3.).

On dissolution, the AGis wound up and its property liquidated. The

management board must notify the Commercial Register of the AG's

dissolution. After the dissolution, the AGgoes into the liquidation

period. Normally, the members of the management board serve as

liquidators, but other persons, including legal entities, may be

appointed liquidators. The liquidators must be registered in the

Commercial Register. The liquidators must draw up a liquidation opening

balance sheet immediately and financial statements at the end of each

year (Sec. 270 AktG). They must finalize the ongoing business,

collect receivables, sell the AG's assets and pay the debts (Sec. 268

AktG). They must inform the creditors of the company's dissolution

and request them to state their claims. The note to the creditors must

be published three times in the Official Gazette (Sec. 267 AktG). The

liquidation surplus may be distributed, at the earliest, 1 year after

the third publication.

Any property remaining after the complete payment of debts (liquidation

surplus) must be distributed to the shareholders according to the

proportionate par value of their shares, unless there were specific

classes of shares which grant a priority. The liquidators must inform

the local court that the liquidation is terminated. After examination

by the local court, the company is removed from the Commercial Register

(Sec. 273 AktG).

1.2.1.5. Limited partnership with shares (KGaA)

The limited partnership with shares is a rarely used hybrid between the

stock company (AG) and the limited partnership (KG). The company

law rules governing the KGaAare laid down in the Stock Company Law

(Secs. 278 to 290 AktG). For the taxation of KGaAs, see 14.2.2.

The KGaAhas at least one general partner with unlimited liability.

The general partner need not be an individual. It can be an AGor a

GmbH, which makes it possible to restrict the liability of the

general partner to the share capital.

The other members of the KGaAare shareholders with limited

liability, as in an AG. The company must have at least five founders.

Only the general partner is entitled to the management and the

representation of the KGaA. In this respect, the general partner in a

KGaAhas the same responsibilities as the management board of an AG

(see 1.2.1.1.). Similar to the AG, the KGaAhas a supervisory

board (Sec. 287 AktG) and a shareholders' meeting, which decides on

the most important issues, such as the appointment of the supervisory

board and the discharge of the management of the general partner and

supervisory board (Sec. 285 AktG).

1.2.2. Limited liability company

1.2.2.1. General

The limited liability company (Gesellschaft mit beschr nkter Haftung,

GmbH) is designed primarily for small and medium-sized businesses and

is the prevalent structure for German subsidiaries of resident and

non-resident companies. The Limited Liability Company Law (GmbHG) of

20 April 1892 governs the rights and duties of limited liability

companies and their shareholders.mayThe GmbHis an independent legal

entity, which can be established for any legal purpose (Sec. 1

GmbHG).

Since the transfer of shares in a GmbHis more complicated and more

expensive (due to notary fees) than the transfer of shares in an AG,

the GmbHis less suitable if widespread ownership or frequent

transfers of shares are envisaged. On the other hand, the articles of

incorporation of a GmbHcan be designed more flexibly than those of

an AG.

The essential differences between the GmbHand the AGare:

- if a shareholder of a GmbHfails to pay up the amount due on his

contribution and the amount is not recoverable from him, the other

shareholders are liable for the deficiency in the share capital

(Sec. 24 GmbHG);

- the minimum share capital of a GmbHis DEM 50,000 (EUR 25,000);

for an AG, it is DEM 100,000 (EUR 50,000);

- subscription to the shares of a GmbHcannot be offered publicly

and the shares cannot be quoted on a stock exchange;

- the shares in a GmbHmust be registered and they can be

transferred only by notarial deed; and

- the GmbHis subject to less public disclosure of its financial

affairs.

The GmbHmust have at least one managing director (Gesch ftsf hrer)

(Sec. 6 GmbHG). The managing director is registered in the Commercial

Register. The appointment is either fixed in the articles of

incorporation or by decision of the shareholders (Secs. 6(3) and 46

GmbHG). The managing director is responsible for the operation of the

business, and he represents the GmbHin its dealings with third

parties. With regard to third-party rights, any action of the managing

director which binds the company is unaffected by any limits placed on

his authority by the articles of incorporation, a decision of the

shareholders or a service contract (Sec. 37(2) GmbHG). The managing

director is responsible for proper bookkeeping and for preparing the

annual financial statements (Secs. 41 and 42 GmbHG).

If the year-end balance sheet or any interim balance sheet shows that

the company's losses have reached half of the company's share capital,

the managing director must convene the general shareholders' meeting

and inform it of the situation. If the company becomes unable to pay

its liabilities or if the value of the liabilities exceeds the value of

the assets, the management board must initiate bankruptcy proceedings

within 3 weeks (Sec. 64 GmbHG). Members of the management board are

personally liable if they do not execute their duties with sufficient

care (Sec. 43 GmbHG).

The articles of incorporation may provide for a supervisory board

(Aufsichtsrat) (Sec. 52 GmbHG). It is compulsory if the GmbHhas at

least 500 employees. For labour representation in the supervisory

board, the rules described in 1.2.1.1.apply.

The shareholders' meeting decides on the most vital matters affecting

the GmbH. The main duties of the shareholders' meeting are to (Sec.

46 GmbHG):

- approve the financial statements and the decision on the use of

the profit;

- call in outstanding capital;

- appoint and dismiss the managing directors;

- approve the managing directors' activities for the financial year;

and

- supervise the management.

Additional matters can be specified in the articles of incorporation.

An amendment to the articles of incorporation must be decided by a

three-quarters majority of the shareholders voting at the meeting. The

decision must be certified by a notary. The articles of incorporation

can provide for additional conditions (Sec. 53 GmbHG).

The financial statements of a GmbHmust be audited by a certified

chartered accountant if the GmbHexceeds at least two of the three

following criteria (Secs. 316 and 267 HGB):

- balance sheet total: DEM 6,720,000;

- turnover: DEM 13,440,000; and

- employees: 50.

Regardless of the size of the GmbH, the financial statements (for

non-audited GmbHs: only the balance sheet and the notes) must be

deposited with the Commercial Register. Those of GmbHs of a certain

size must be published in the Official Gazette (Sec. 325 HGB).

Under the Works Council Law, employees have the right to establish a

works council if the company has more than five employees. The works

council represents the employees before the employer and has certain

rights concerning new employment contracts and dismissals.

1.2.2.2. Capital

The minimum share capital (Stammkapital) of a GmbHis DEM 50,000 (EUR

25,000) (Sec. 5 GmbHG). Each shareholder must take over a share of at

least DEM 500 (EUR 100), each share must be divisible by DEM 100 (EUR

50). DEM 100 (EUR 50) represent one vote (Sec. 47(2) GmbHG). If the

contribution is made in cash, at least 25% of each share must be paid

in. In total, at least DEM 25,000 (EUR 12,500) have to be paid-in. If

the GmbHis created by a single shareholder, he must pay in at least

DEM 25,000 (EUR 12,500) and provide a guarantee for the outstanding

capital. Contributions in kind must be contributed in full before the

GmbH's application for registration is submitted (Sec. 7 GmbHG).

Shares are freely transferable by sale and heritage, unless the

articles of incorporation provide for specific conditions, e.g. the

consent of the other shareholders or the management of the company

(Sec. 15 GmbHG). The transfer of shares must be effected by notarial

deed. The managing directors must file a list of shareholders once a

year and transmit it to the Commercial Register together with the

financial statements (Sec. 40 GmbHG). Any transfer of shares appears

as change of shareholders on this annual list. Shares in a GmbH

cannot be traded on a stock exchange.

The shareholders' liability is limited to the total unpaid share

capital. Shareholders may also become liable for the unpaid

contribution of other shareholders (Sec. 24 GmbHG). The articles of

incorporation may provide for additional contributions (Nachsch sse).

The Limited Liability Company Law does not prescribe specific

debt/equity ratios. Secs. 32a and 32b GmbHG, however, contain

restrictions on the repayment of loans to a shareholder when the

company is in a crisis. The provisions state that a loan is deemed to

be equity (and can therefore be satisfied only after the other

liabilities) if the shareholder granted (or not recalled) the loan at a

time when the company was in such a bad situation that a diligent

manager would have contributed additional capital instead of granting a

loan. The provisions also include loans which were paid back within 1

year before the bankruptcy procedure was commenced. They concern not

only proper loans but also similar operations, such as guarantees or

the letting of assets (buildings). For the tax rules on thin

capitalization, see 13.3.

1.2.2.3. Formation

A GmbHcan be founded by one or more persons. Shareholders can be

residents, non-residents, individuals, any legal entities as well as

general partnerships (OHG) and limited partnerships (KG).

The formation of a GmbHis done in six steps:

- agreement on the articles of incorporation and taking over the

share capital. The articles of incorporation must be signed by all

the shareholders and certified by a notary. At this stage, a

"pre-GmbH" (Vor-GmbH) exists, which is subject to the Limited

Liability Company Law and is fiscally treated as the future

GmbH. It does not, however, legally exist as a GmbHand, if

the registration of the company fails, the shareholders have

unlimited responsibility for the liabilities incurred by the

pre-GmbH;

- appointment of at least one managing director by the shareholders.

The managing director can already be mentioned in the articles of

incorporation;

- payment of the minimum cash contribution (see 1.2.2.2.) and the

full amount of any contributions in kind;

- application for registration in the Commercial Register

(Handelsregister) at the local court of the GmbH's seat by the

managing director;

- examination of the formation by the local court; and

- registration of the AGin the Commercial Register. At this

stage, the GmbHlegally exists.

The formation is subsequently published in the Official Gazette

(Bundesanzeiger).

The cost of formation of a GmbHdepends on the par value of the share

capital. For a GmbHwith a par value of DEM 50,000 (minimum share

capital, see 1.2.2.2.), the overall costs for the notary,

registration and publication of the formation is normally around DEM

2,000. There are no taxes, e.g. capital duties, on the formation (see

12.).

1.2.2.4. Liquidation

A limited liability company is dissolved for the following reasons

(Sec. 60 GmbHG):

- expiration of the lifetime provided for in the articles of

incorporation;

- decision of the shareholders (a three-quarters majority of the

share capital represented at the meeting is necessary), unless the

articles of incorporation provide otherwise;

- initiation of bankruptcy proceedings or a court order denying such

proceedings due to the lack of funds to cover the costs of the

proceedings;

- court decision, if the articles of incorporation contain severe

legal deficiencies.

Furthermore, the company can be dissolved on the occasion of a merger

(see 1.4.2.) or a division (see 1.4.3.).

The dissolution must be registered in the Commercial Register. It must

be published three times in the Official Gazette, and the creditors

must be asked to request payment of their claims.

The managing directors become the liquidators, unless other persons

were appointed liquidators by the articles of incorporation or by

shareholders' resolution and unless the dissolution is due to a

bankruptcy procedure. The liquidators must be registered in the

Commercial Register. They must terminate the company's current

operations, satisfy the creditors and convert all other assets into

cash (Sec. 70 GmbHG). They must draw up an opening balance sheet at

the beginning of the liquidation and a balance sheet for the end of

each year.

The liquidation surplus remaining after payment of all debts is

distributed to the shareholders in proportion to their shares. The

distribution cannot occur before 1 year after the note to the creditors

was published for the third time (see above). The finalized liquidation

is to be notified to the Commercial Register by the liquidators. After

examination by the local court, the company is removed from the

Commercial Register (Sec. 74 GmbHG).

1.2.3. Holding company

There is no special holding company regime in Germany. Holding

companies can have any legal form: AG, GmbHor partnership.

There are, however, numerous tax benefits attached to a holding

activity (see 2.10.5., 8.3.2., 9.and 14.1.). These benefits

generally require that the holding company be an AGor GmbH.

1.2.4. Partnership

1.2.4.1. General

German law provides for the following types of partnerships:

- general partnership (Offene Handelsgesellschaft, OHG);

- limited partnership (Kommanditgesellschaft, KG);

- silent partnership (Stille Gesellschaft); and

- civil law partnership (Gesellschaft b rgerlichen Rechts, GBR).

For the limited partnership with shares (Kommanditgesellschaft auf

Aktien, KGaA), see 1.2.1.5.

The common feature of these non-corporate legal forms of business

(except the silent partnership) is the unlimited personal liability of

at least one partner to the partnership's creditors. The commercial

partnerships, i.e. the general partnership and the limited partnership,

are discussed in this section in more detail. For silent partnerships,

see 1.2.7.1.The civil law partnership is not relevant for business

activities.

The rules governing the commercial partnerships are laid down in the

Civil Code (BGB) and the Commercial Code (HGB).

The general partnership (OHG) is an association of two or more

general partners established for the purpose of carrying on a trade

under a common firm name. The partners can be individuals, companies or

other partnerships. In a general partnership, all the partners have

unlimited personal liability for the partnership's debts. There are no

minimum capital requirements. In practice, a limitation on liability

can be achieved by using limited liability companies (AGs, GmbHs)

as partners.

The limited partnership (KG) consists of at least one general partner

with unlimited liability and at least one limited partner, who is

liable only to the extent of his capital contribution. In most other

respects, the limited partnership closely resembles the general

partnership.

The KGis commonly used in Germany in an alternative form called

GmbH& Co. KG. In this case, the general partner is a GmbH, which

makes it possible to limit the partnership's liability to the share

capital of the GmbH, i.e. typically to DEM 50,000 (EUR 25,000).

If not at least one general partner of a KGis an individual, it is

subject to the same rules as AGs and GmbHs with regard to the

establishment, the audit and the publication of financial accounts and

consolidated accounts (Sec. 264a HGB).

1.2.4.2. Formation

The partnership is set up internally by the conclusion of a partnership

agreement (Sec. 705 BGB). With respect to third parties, the

partnership begins to exist when it is registered or when it started

its business, if earlier. The partnership agreement is not subject to

any formal requirements, and it may be concluded orally. Registration

in the Commercial Register is compulsory. The application must include

the name and address of each partner, the firm name, the location of

the partnership's office and the date of its establishment (Sec. 106

HGB). All the partners are entitled to manage the company and to

represent it with respect to third parties. The power or authority of a

general partner cannot be restricted with respect to third parties.

Most of the provisions of the Commercial Code applicable to general

partnerships also apply to limited partnerships (Sec. 161 HGB). The

application for the registration of a limited partnership in the

Commercial Register must comprise (in addition to the information

required for general partnerships) the name of the limited partners and

the amount of their contributions. Only the general partner is

authorized to manage and represent the company. The limited partner

only has a right to object to transactions that go beyond the normal

course of the business (Secs. 164 and 170 HGB).

1.2.4.3. Liquidation

A general partnership may be dissolved for the following reasons (Sec.

131 HGB):

- expiration of the time period for which the partnership agreement

was concluded;

- resolution of the partners;

- initiation of bankruptcy proceedings against the partnership's

property or against the property of a general partner; or

- court judgement for material cause on application of any partner.

After dissolution, the partnership enters into a liquidation period

(Sec. 145 HGB). The purpose of the liquidation is to finalize the

pending business, collect claims, convert assets into cash and pay off

the creditors (Sec. 149 HGB). The liquidators draw up the balance

sheets both at the beginning and at the completion of the liquidation

(Sec. 154 HGB). After all the assets are distributed, the liquidators

must notify the Commercial Register of the completed liquidation and

apply for deregistration of the partnership.

The limited partnership is dissolved according to the regulations

applicable to general partnerships.

1.2.5. Economic interest grouping

Germany implemented the EC Regulation on European Economic Interest

Grouping (EEIG) (1) on 14 April 1988. According to the implementation

law, European economic interest grouping (Europ ische Wirtschaftliche

Interessenvereinigung, EWIV) is close to a general partnership from a

commercial law point of view. The purpose of an EWIVis to support

the activities of its members rather than to generate profits itself.

1. Council Regulation of 25 July 1985 (85/2137/EEC). For the text,

see Binder *****, EC Corporate Law. For a commentary, see EC

Corporate Tax Law (Amsterdam: IBFD Publications BV, loose-leaf).

Like a general partnership, an EWIVmay have rights and liabilities,

conclude contracts and be sued in court. An EWIVmay be terminated

any time by decision of the shareholders.

An EWIVis used primarily as a vehicle for international cooperation

of different professionals, e.g. lawyers.

1.2.6. Association and cooperative

The rules for associations (Vereine) are laid down in Sec. 21 et seq.

of the Civil Code (BGB). Civil law distinguishes between an

association with an economic purpose (this includes the companies AG

and GmbH) and associations with a non-profit purpose. For economic

associations (AG, GmbH), see 1.2.1.and 1.2.2.For non-profit

associations, the Civil Code prescribes that an association must have a

management board (Vorstand) that represents the association vis- -vis

third parties (Sec. 26 BGB). The management board is appointed by the

general members' meeting. Membership in an association cannot be

transferred (Sec. 38 BGB). The association is dissolved by a decision

of the members.

A cooperative (Genossenschaft) is a company with a separate legal

existence whose primary objective is to support the business of its

members via a centralization of actions. A cooperative must have a

management board and a supervisory board. Cooperatives are commonly

used in the agricultural sector.

The practical importance of both associations and cooperatives for

foreign investors seems to be limited, as compared to the other forms

of business described here.

For the tax issues, see 14.4.

1.2.7. Other forms

1.2.7.1. Silent partnership

The silent partnership is an internal form of cooperation. It does not

have an external legal existence.

The silent partnership resembles a profit-sharing bond in some

respects. The silent partner pays his contribution to a business (AG,

GmbH, partnership) and usually receives a variable remuneration based

on the profit. The remuneration can include a fixed part. The silent

partner can also participate in the losses and hidden reserves of the

business. The silent partner's liability is limited to his capital

contribution. For the tax issues, see 14.2.3.

1.3. Foreign investors

There are almost no investment restrictions on foreign investors. There

is no exchange control in Germany.

Foreign investors may operate through any of the business organizations

stated above (see 1.2.).

Non-resident companies may also conduct business in Germany by

establishing a branch (Zweigniederlassung), see 1.3.2.The

overwhelming majority of non-resident companies, however, operate in

Germany via a GmbH(see 1.2.2.), due mainly to the more favourable

corporate income tax rates applying until tax year 2000 (see 2.12.

and 8.4.2.1.), as compared to a branch, but also to a relatively

flexible company law. Branches are used primarily by insurance

companies, banks and non-resident companies that may deduct the

branch's start-up losses from their own taxable base in their country

of residence.

1.3.1. Subsidiary

Non-residents wishing to establish a stock company (AG) or limited

liability company (GmbH) in Germany are not subject to more

restrictive rules than residents (see 1.2.1.and 1.2.2.). The

physical presence of foreign shareholders for certain acts, such as the

company's formation, may be avoided by providing a proxy to a

representative in Germany. The proxy must normally be certified by a

notary in the shareholder's country of residence.

1.3.2. Branch

A branch (Zweigniederlassung) represents a distinct part of a business

which is registered separately in the Commercial Register. It is to be

distinguished from more simple forms of establishment (e.g. public

relations offices), generally called Betriebsst tte, through which the

business of a company may be carried out, but which are not formally

registered.

The formal registration of a branch is done upon application to the

local court of the municipality in which the branch will be located.

The application must be accompanied by the articles of incorporation

and contain the branch's business purpose, its name and the names of

the legal representatives (Secs. 13, 13a and 13b HGB). In addition to

this information, certain documents must be provided by the foreign

head office (Secs. 13d to 13g HGB), including:

- name and number of the register where the foreign company is

listed in its country (if applicable);

- company form;

- a certified copy of the articles of incorporation;

- a certified German translation of the articles of incorporation;

and

- mainly for banks and insurance companies, proof of permission to

carry on business in Germany (allowances are granted by the

Federal Surveillance Institutions for Banks and Insurance

Companies).

The taxation of branches is discussed in 8.4.2.

1.3.3. Other forms of business

In general, all legal forms of business are also open to foreign

investors. Direct investments in German partnerships are less favoured,

however, because the foreign partner is taxed at the unfavourable tax

rate for branches until 2000 (see 2.12.and 8.4.2.1.). As from tax

year 2001, the corporate income tax rates for branches will be the same

as those for resident companies, so that this disadvantage for the

investment in German partnerships will disappear.

However, partnerships can cause numerous problems with respect to the

application of tax treaties. Due to the specific tax treatment of

partnerships in Germany, qualification conflicts can often arise when

payments occur between a partnership and its foreign partner (see

14.2.for the taxation of partnerships). In addition, partnerships

generally do not benefit from the intercompany privilege on

distributions (affiliation privilege).

1.4. Corporate restructuring

The Reorganization Law (Umwandlungsgesetz, UmwG), effective 1 January

1995, regulates mergers, divisions, changes of business forms and

specific transfers of property. The specific transfers of property

concern the transfer of property from companies to the federal

government, the L nder or the communities; they are not discussed in

the following section.

Only reorganizations of German entities are possible under the

Reorganization Law. Cross-border mergers or divisions are not yet

possible.

The reorganizations can normally be done without triggering capital

gains taxation, see 10.

1.4.1. Change of business form

The mere change of the legal form (Formwechsel, Secs. 190 to 213

UmwG) does not entail a transfer of assets and liabilities from one

entity to another. The legal identity of the entity does not change,

simply its form.

The most frequent cases are the conversion of an AGinto a GmbHor

vice versa and the conversion of a partnership into a company (AG,

GmbH, KGaA) or vice versa.

The shareholders/partners must make a formal decision on the

conversion. The decision requires unanimity for the conversion of

partnerships (unless the partnership agreement provides otherwise) and

a three-quarters majority for the conversion of companies. The decision

must be certified by a notary. The conversion must be registered in the

Commercial Register.

1.4.2. Merger

Mergers can be done by absorption of one company by another

(Verschmelzung durch Aufnahme) or by the merger of two or more

companies into a newly established company (Verschmelzung durch

Neubildung).

The following entities may participate in a merger:

- companies (AG, GmbH, KGaA);

- commercial partnerships (OHG, KG);

- cooperatives;

- associations;

- mutual insurance companies.

Individuals may take part in a merger if they are the sole shareholder

of a company and if they take over the business of the absorbed

company.

The absorbed entity is dissolved by the merger and disappears with the

registration of the merger in the Commercial Register. The shareholders

of the absorbed entity receive shares in exchange for the transfer of

the business. The assets and liabilities are transferred in universal

succession (Gesamtrechtsnachfolge); they do not have to be transferred

one by one (Einzelrechtsnachfolge).

The merger agreement must be certified by a notary (Sec. 6 UmwG).

Basically, a merger report (Sec. 8 UmwG) and a merger audit (Sec. 9

UmwG) must be made. This is not necessary, however, if all the

shareholders agree by a notarial deed.

The shareholders of the participating entities must make a formal

merger decision (Sec. 13 UmwG). A three-quarters majority is required

for an AGand GmbH; for a partnership, unanimity in required unless

the partnership agreement provides otherwise.

The representatives of the participating entities must apply for

registration of the merger in the Commercial Register. The balance

sheet of the absorbed company established on the merger date must be

attached. The merger date can be 8 months before the date of the

application (retroactive effect).

1.4.3. Division

ompany law distinguishes between three types of division:

- in a split-up (Aufspaltung, Sec. 123(1) UmwG), the absorbed

company is dissolved after it transferred its assets to other

existing or newly formed companies. The shareholders of the

absorbed company receive new shares in the recipient companies;

- in a spin-off (Abspaltung, Sec. 123(2) UmwG), part of the

company's assets is transferred to one or several other (existing

or newly formed) company or companies. The absorbed company is not

dissolved. The shareholders of the absorbed company receive new

shares in the recipient company or companies; and

- in a split-off (Ausgliederung, Sec. 123(3) UmwG), a company

transfers its assets to another (existing or newly formed)

company. As opposed to a spin-off, the absorbed company itself

(not the shareholders of the absorbed company) receives shares in

the recipient company as compensation.

The same entities that can take part in a merger can also take part in

a division (see 1.4.2.).

A division agreement must be established by a notarial deed (Sec. 126

UmwG). The agreement must specifically enumerate the assets and

liabilities transferred. The shareholders can reject a division report

and a division audit (Secs. 125 and 127 UmwG). This shareholder's

decision has to be done by notarial deed. A division audit is not

necessary in a split-off. The shareholders must formally decide on the

division, usually with a three-quarters majority.

The division must be registered in the Commercial Register and can be

done 8 months retroactively.

1.4.4. Purchase/takeover of company

This section deals with the acquisition of a company via a share deal.

For asset deals, see 1.4.5.

A share deal does not affect the target company directly. Its legal

existence remains unchanged, as do all contractual agreements concluded

by the company. The buyer of the shares does not have unlimited

personal liability for the business debts of the target company; his

liability is normally restricted to the share capital.

For the real estate transfer tax issues relating to the acquisition of

shares, see 12.2.1.

1.4.4.1. Stock company

The transfer of shares in an AGdoes not require a notarial deed.

The acquirer must immediately inform the company in writing:

- when his participation reaches more than 25% of the shares (Sec.

20 (1) AktG). This is because a shareholder with a participation

of more than 25% has, as a practical matter, a veto right

(Sperrminorit t) since many important decisions, e.g. capital

increase or decrease, must be taken with a three-quarters

majority; and

- as soon as the participation represents a majority of the shares

(Sec. 20(4) AktG).

When a shareholder obtains control of an AG, certain rules come into

play. For example, consolidated accounts (Konzernabschluss) may have to

be established that include the controlled company (Sec. 290 HGB),

and the controlled company may have to prepare a report on the

transactions carried out with related companies (Abh ngigkeitsbericht,

Sec. 312 AktG) in order to check whether the controlled company was

subject to any disadvantages due to its dependency.

1.4.4.2. Limited liability company

The transfer of shares in a GmbHrequires a notarial deed (Sec. 15

GmbHG).

The articles of incorporation may provide that the management of the

company or a certain majority of the shareholders must give their

consent to the transfer of shares. The acquisition of a controlling

majority may necessitate the establishment of consolidated accounts

that include the controlled company (Sec. 290 HGB).

1.4.5. Purchase of an existing business

This section covers the purchase of an existing business from a

company, partnership or sole proprietorship as well as the acquisition

of partnership interests.

In an asset deal, all or part of the assets of a business are

transferred to another legal entity. All assets and liabilities sold

must be described in the contract and must be transferred individually

(Einzelrechtsnachfolge; singular succession). The creditors must agree

to the transfer of their claim.

Even if the buyer does not take over the liabilities of the business,

he becomes liable for them if he carries on the business name (Firma,

Sec. 25 HGB). The contracting parties can exclude this liability. The

exclusion is valid vis- -vis third parties, however, only if it is

registered in the Commercial Register.

Special liability provisions exist with respect to tax liability (Sec.

75 AO). The purchaser is liable for any company taxes (business tax,

VAT, withholding taxes) that were incurred from the beginning of the

last calendar year before the acquisition, provided they are assessed

by the tax authorities, at the latest, 1 year after the acquisition was

declared. This liability does not concern the corporate income tax.

Changes in ownership of immovable property must be registered in the

Land Register. It can trigger the real estate transfer tax, see

12.2.1.

The transfer of partnership interests must be registered in the

Commercial Register.

1.5. Corporate immigration and emigration

Neither corporate immigration nor corporate emigration is recognized

under German company law.

Emigration necessarily leads to the dissolution of the company.

A non-resident company cannot "immigrate". It must be newly founded

under German company law in order to be legally recognized as a German

company.

2. CORPORATE INCOME TAX

2.1. Introduction

2.1.1. Type of tax system

The main tax imposed on companies in Germany is the corporate income

tax (K rperschaftsteuer). A solidarity surcharge (see 3.3.) is levied

on the corporate income tax due by the company and on the withholding

tax arising upon distribution. In addition, the income of companies is

also subject to the business tax on income (see 3.2.)

For a long time Germany has applied a full imputation system and

different corporate tax rates for distributed and retained earnings.

According to the Tax Reduction Law (Unternehmenssteuerreform- und

Steuersenkungsgesetz) approved on 14 July 2000, the full imputation

system is abolished and a single tax rate applies for distributed and

retained earnings. The new rules apply as from tax year 2001 for

companies that have a financial year corresponding to the calendar

year; for other companies, they apply for the first time for their

financial year 2001/02 (their tax year 2002).

2.1.1.1. Imputation system and split rate system

For financial years ending 31 December 2000 and for deviating financial

years 2000/01, Germany applies a full imputation system for the last

time. Full imputation means that the corporate income tax levied at the

company level is fully credited against the income tax charge of a

resident shareholder. If the imputation credit exceeds the

shareholder's tax charge, the excess is refunded. Non-resident

shareholders are not eligible for an imputation credit or refund unless

they hold the German shares through a German permanent establishment.

The taxable dividend at the shareholder level includes the cash

dividend, the withholding tax on the distribution and the imputation

credit. This gross dividend is subject to corporate income tax for

corporate shareholders at the regular rates and to the applicable

marginal income tax rate for individual shareholders. The full

imputation of the corporate income tax paid by the distributing company

ensures that the distributed profits of a company are finally taxed at

the tax rate applicable at the level of the shareholder.

The German corporate income tax system for financial years ending

31 December 2000 and for deviating financial years 2000/01 is a split-

rate system. The tax rate for retained earnings is higher than for

distributed earnings. This results in a reduction in the corporate

income tax if retained earnings that had been subject to the full

corporate income tax rate are distributed. On the other hand,

distributions can lead to an increase in corporate income tax up to the

distribution rate if income that has been subject to reduced rates or

certain tax-free income (e.g. tax-free investment grants) is

distributed. This ensures that all profits are equally taxed at the

same rate upon distribution.

There is an exception for tax-free foreign-source income and tax-free

capital contributions. If they are distributed, the distribution rate

does not apply, i.e. foreign-source income or contributions to the

capital reserves can be redistributed without corporate income tax. The

shareholder consequently does not receive an imputation credit for

these dividends.

Technically, the earnings of a company are allocated to different

baskets in declining order according to the tax rate applied

(Eigenkapitalanteile; the common abbreviation is EK, followed by the

tax rate, e.g. EK 40 for earnings taxed at 40%). Tax-exempt income is

classified in four different categories: foreign-source income

(dividends and foreign permanent establishment income, EK 01),

miscellaneous tax-exempt income (EK 02), income earned before 1977 (EK

03) and capital contributions (EK 04).

The use of the retained earnings baskets upon distribution is not

arbitrary, but the distribution is deemed to be made out of the highest

taxed baskets first, and then in declining order of the tax rates

applied. Tax-exempt income is used in the order mentioned above:

foreign-source income, miscellaneous income, earnings from before 1977

and capital contributions.

2.1.1.2. Amendments according to the Tax Reduction Law

After the abolition of the imputation system, corporate income tax is

no longer included in the taxable base of the shareholder, and there is

no imputation of the corporate income tax against the income tax

payable by the shareholder.

The resulting double taxation of the distributed profits is mitigated

by a reduction of the corporate income tax rate and by amendments in

the taxation of the shareholders. Essentially, dividends are exempt in

the hands of corporate shareholders and individual shareholders are

only taxed on 50% of the dividends (see 7.1.).

The classification of taxable income into different baskets is

abolished. There are transitional rules for the treatment of profits

which have been earned under the imputation system. These rules ensure

that the distribution of old profits still leads to a tax reduction

(down to the old distribution rate of 30%) when those profits have been

fully taxed or to a tax increase (up to the old distribution rate of

30%) when untaxed profits are distributed (see 2.1.1.1.). The

transitional rules apply for 15 years. Profits earned under the

imputation system and distributed after the transitional period no

longer give rise to any tax reductions or increases.

Under the new rules, only capital contributions other than increases of

the share capital are separately accounted for because their

distribution is not deemed taxable income for the shareholders. Those

capital contributions are deemed to be distributed last for tax

purposes, i.e. only when the company has no other distributable

reserves.

2.1.2. Statutory framework

Taxable income is determined on the basis of the Commercial Code

(Handelsgesetzbuch, HGB), Income Tax Law (Einkommensteuergesetz,

EStG) and Corporate Income Tax Law (K rperschaftsteuergesetz,

KStG). The Commercial Code lays down the accounting principles (Sec.

238 et seq. HGB), which are also followed by the Income Tax Law

unless specific tax rules provide for a different treatment (Sec. 5(1)