ARTICLE · 02 JUNE 1999

167. Specifics of New German Tax Reforms

KPMG Germany

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This article discusses the specific provisions of the new tax reform legislation. Information on the fiscal impact of the reforms is provided by article 166.

Neither the new "ecological" taxes nor the changes in the taxation of low-paying jobs are covered by the following article. See the separate articles nos. 168 and 169 respectively.

I. Profit Determination

1. General

End of deductibility of foreign branch losses (sec. 2a (3) and (4) EStG)

The election under sec. 2a (3) and (4) EStG to deduct the losses of foreign branches located in tax treaty countries has been repealed. The deduction of such losses is possible in the 1998 assessment period for the last time. The recapture of otherwise tax-exempt foreign branch profits will continue through the 2008 assessment period. The recapture rules previously in effect regarding

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