As of January 1, 2022, the ATAD Implementation Act has fully entered into force.

With this law, the Federal Republic of Germany has implemented the EU directives to combat tax avoidance practices.

New provisions have been added to the Income Tax Act and the Corporate Income Tax Act to limit taxation incongruities. In most cases, the deduction of operating expenses is denied if the income offset by the operating expenses is not taxed. Domestic and cross-border tax arrangements are covered.

Due to the new provisions of the ATAD Implementation Act, the scope of application of the Foreign Tax Act, in particular the exit taxation and the additional taxation, has been considerably expanded.

With regard to the exit taxation of natural persons, simplifications were introduced for the application of the returnee regulation in the Foreign Tax Act.

The taxation of additional income, which is also governed by the Foreign Tax Act, was reformed. The most important element of the reform is the adjustment of the control criterion. In the future, the question of whether a company is controlled will generally depend on whether the company is incorporated in Germany or abroad. In the case of multi-level company structures, loss consolidation will no longer be carried out at the level of the top foreign company for the purpose of attribution taxation.