Act Combating Tax Avoidance and Unfair Tax Competition

With the Combating Tax Havens Act (Steueroasen-Abwehrgesetz, “StAbwG”) which came into force in 2021, the legislator of the Federal Republic of Germany is pursuing the goal of curbing tax avoidance and aggressive tax planning through business relationships in so-called non-cooperative tax jurisdictions.  Incentives to shift profits to low-tax countries shall be reduced in order to prevent disproportionate tax advantages and ensure tax revenues in Germany. To this end, various defensive measures are introduced and the documentation requirements for affected business transactions are tightened.
 

Scope

The StAbwG applies to individuals with unlimited and limited tax liability, corporations, associations of persons and funds. In principle, all types of tax fall within the scope of the StAbwG; however, VAT (including import VAT), import and export duties and excise duties are explicitly excluded. The provisions of the StAbwG take precedence over those in double taxation agreements.

Non-cooperative tax jurisdictions 

A tax jurisdiction is specifically classified as non-cooperative if it is listed in the Ordinance to Combat Tax Evasion (Steueroasen-Abwehrverordnung, “StAbwV”), which is based on the EU list of non-cooperative countries and territories for tax purposes. The Council of the European Union last updated this so-called “EU-Blacklist” on February 17, 2026. The most prominent new addition to the ten countries and territories currently listed is Vietnam. The list is reviewed every six months. The so-called “EU-Greylist” includes countries that have committed to reforming their legislation to comply with the agreed standards for responsible conduct in tax matters. These countries currently include, among others, Greenland, Jordan, Montenegro, Morocco and Turkey. Until now, the countries listed on the EU-Blacklist at the end of a calendar year were included in the StAbwV. The Russian Federation has been included in the StAbwV since December 2023.

Business transactions affected 

The business transactions (and shareholdings) affected by the StAbwG are those that taxpayers maintain in or with reference to a non-cooperative tax jurisdiction. This also includes assumed contractual relationships („dealings“) pursuant to § 1 (4) s. 1 no. 2 of the German External Tax Relations Act (Außensteuergesetz, “AStG”) and business transactions of or via a partnership or permanent establishment. Whether these transactions take place at arm‘s length or between related parties is irrelevant for this purpose.

Defensive measures under the Combating Tax Havens Act 

In relation to the respective business transaction, only one of the following defense     measures applies.  

• Tighter rules on controlled foreign company (CFC)
  §§ 7 to 21 AStG are extended to the effect that all income of the foreign company as an intermediate company is subject to CFC legislation. The tighter CFC legislation applies from the year following the inclusion of a territory in the StAbwV. 
• Withholding tax measures  
  Income with limited tax liability pursuant to § 49 of the German Income Tax Act (Einkommensteuergesetz, “EStG”) is limited by the StAbwG for non-cooperative tax jurisdictions. Withholding tax obligations are significantly extended to persons, corporations, associations of persons or funds domiciled in Germany. The wording of the StAbwG does not require positive knowledge or oblige the taxpayer to have such knowledge. 

In addition, income from

1. financing arrangements (in particular loans and finance leases) 
2. insurance or reinsurance benefits 
3. provision of other services (except: transfer of use) 
4. trade in goods or services 
5. renting & leasing or sale of rights that are entered in a domestic public book or register („register cases“) 

is subject to withholding tax in Germany.

These supplementary withholding tax measures apply from the year following the inclusion of a territory in the StAbwV, for example, for the Russian Federation from 2026 onwards.

• Measures relating to profit distributions and sale of shares 
  The tax exemptions and benefits otherwise applicable to profit distributions and the sale of shares are not applicable within the scope of shareholdings in a company in a non-cooperative tax jurisdiction. This specifically concerns § 8b (1) of the German Corporation Income Tax Act (Körperschaftsteuergesetz, “KStG”), DTA regulations, the partial income method and the final withholding tax. These tightening measures apply from the third year following the inclusion of an area in the StAbwV. 
• Ban on deduction of operating expenses and work-related expenses
  The ban on deduction is subordinate to the tighter CFC legislation pursuant to the StAbwG, the CFC legislation pursuant to the AStG, the withholding tax measures pursuant to the StAbwG and § 49 of the EStG.   
  The ban on the deduction of operating expenses only applies from the fourth year following the inclusion of a territory in the StAbwV. 
  
  

Enhanced cooperation obligations

§ 12 StAbwG imposes enhanced obligations of cooperation for business transactions within the scope of the StAbwG that go beyond 

§ 90 of the German Fiscal Code (Abgabenordnung, “AO”). The corresponding records have to be created at the latest one year after the end of the relevant financial year and submitted without request to the local competent tax office and, if the limit of EUR 750 million is exceeded, also to the German Federal Central Tax Office (Bundeszentralamt für Steuern).  For financial years that began before December 31, 2022, no objections will be raised if the records were submitted for the first time by December 31, 2024.  

If these obligations are not complied with, the tax authorities may estimate income from non-cooperative tax jurisdictions and the admissibility of external audits is extended. 

Need for action and support from BDO 

Taxpayers who conduct business transactions in non-cooperative tax jurisdictions should check whether and to what extent the 

defensive measures of the StAbwG apply to them to ensure that they meet their tax obligations and to evaluate possible alternative business plannings and their tax implications. It is also advisable to consider the latter with regard to business partners based in countries or territories that have recently been added to the EU-Blacklist.  

Considering the far-reaching consequences of the StAbwG, it is recomended to consider screening at least your key business partners to determine whether they have any links to a tax haven. We would be delighted to assist you with this, in collaboration with our Business Intelligence colleagues. Such a review could also possibly be relevant in relation to a tax control system and may facilitate future tax audits. 

Your contact at BDO will be happy to help you determine your specific need for action. Depending on requirements, we will be happy to support you with the broad expertise of BDO in Germany and, where appropriate, also with colleagues from our network represented across 166 countries worldwide.