1. Background
At the beginning of 2001, the Tax Reduction Act of 23 October 2000 (Steuersenkungsgesetz) Germany implemented sweeping tax changes to improve the international competitiveness of its industry. The tax reform not only reduces income tax rates, but also fundamentally changes the tax regime for German Corporations and the treatment of dividends received from corporations. When it passed the tax reform package 2001 the Federal Parliament requested the Federal Government to submit to the Finance Committee of the Federal Parliament a report on (i) tax treatment of corporate reorganisations, (ii) group taxation principles and (iii) the controlled foreign corporation ("CFC") rules. The Federal Ministry of Finance has submitted this report at the end of March 2001. As a follow-up the German Government has endorsed on 15 August 2001 another tax package to continue the reform of companies’ taxation, in most cases to be effective on 1 January 2002, albeit with some not
