The Annual Tax Act 2022 contains significant changes, reclassifications and restrictions regarding the taxation of income from rights (IP) entered in a German register ("Register Cases"). It was promulgated on December 20, 2022, and the articles relevant to Register Cases entered into force on December 21, 2022.
In the following, we provide a summary of its content, which is significant for internationally operating corporate groups, as well as any further steps that may be required.
BACKGROUND OF THE REGISTER CASES
The central prerequisite for the establishment of a limited tax liability in Germany is, in principle, the existence of a domestic tax connecting factor. The provisions of Sec. 49 (1) No. 2 (f) and No. 6 of the German Income Tax Act (ITA) cover, among other things, income from the licensing as well as the sale of rights which are entered in a domestic public register. The Federal Ministry of Finance (BMF) clarifies that patents entered in the domestic register based on an application to the European Patent and Trademark Office also fall within the scope of the regulation. It does not require any further domestic reference. This means that the licensing or sale of an intangible asset may be taxa-ble in Germany even if neither the licensor nor the licensee or neither the seller nor the buyer is resident in Germa-ny.
In a letter dated November 6, 2020, the BMF commented on the previous general taxation of register cases. Proce-dural simplifications were defined in the BMF letters dated February 11, 2021, July 14, 2021, and June 29, 2022. Please refer to our client information dated January 26, 2022, for details of the individual provisions.
NEW REGULATION THROUGH THE ANNUAL TAX LAW 2022
With the Annual Tax Act 2022, the taxation of registered cases was newly regulated, according to which a distinction must be made between 3 types of cases in particular:
- Remunerations from the licensing or sale of so-called other rights to third parties
- Remunerations from the licensing or sale of so-called other rights to related parties
- Remunerations from the licensing or sale of so-called other rights to remuneration creditors who are tax resident in a so-called non-cooperative tax jurisdiction within the meaning of § 2 German Tax Haven Defense Act.