Tax law

In particular companies engaged in the acquisition, production, purchase or operation of Renewable Energy power plants are faced with the burning issues of the currently complex tax law. Our consultants are on hand for you with their know-how and tact and skill, and will be happy to help you on your way to success.

Transfer taxes (VAT, electricity tax)

In many cases, VAT issues need to be resolved, especially in international tax planning. This often carries an element of risk that the value added resulting from the generation of  electricity from Renewable Energy sources and its distribution might be subject to taxation in several countries whereas no refunds of input tax incurred as part of investment costs are guaranteed at all. International tax planning also bears the risk of electricity tax being charged multiple times, which would cause additional costs that were not budgeted. We help you avoid such scenario.

Income taxes

In cases with the national context, finding the „adequate” structure primarily depends on the question whether companies operating Renewable Energy plants will be owned in the long term or sold.

International structuring involves several overlapping issues relating to the two systems of transparent and non-transparent taxation and domestic tax exemption of profits generated abroad and the possibility of crediting tax paid abroad for inland taxation purposes.

Here, we basically distinguish between the so-called „mid-sized business model” involving the transparent taxation system and the „non-transparent corporation model”. Under the „mid-sized business model” a domestic partnership holds all shares in a domestic corporation that is a partner in a foreign partnership. This foreign partnership is regarded as the permanent establishment of the domestic corporation. With regard to countries that have entered into a double taxation treaty with Germany, the taxation of a permanent establishment by the respective foreign country may be definitive, i.e. the profits generated in such permanent establishment are not subject to any further taxation. 
 

Depending on the respective double taxation treaty, in certain cases it might be advisable not to select the mid-sized business model but to opt for non-transparent taxation involving corporation-based structures.
 
With the so-called „non-transparent corporation model” a domestic corporation holds the shares in a foreign corporation. In cases involving exclusively European companies, the profits generated by the foreign corporation may be exempt from taxation in Germany when distributed to the domestic parent company by virtue of the so-called Parent-Subsidiary Directive, provided that certain conditions are met. In certain cases, no capital gains tax is levied, either. A prerequisite for that is the existence of a profit and loss transfer agreement.
 
In other structures the effect could be at least that only 5% of the dividends distributed by the foreign corporation to Germany would be taxed.
 
When a domestic company distributes profits to its shareholders (natural persons), a lump-sum withholding tax at the rate of 25% plus solidarity surcharge is usually charged:
 
Whether the „mid-sized business model” or the „non-transparent corporation model” is preferable particularly depends on the details of the respective double taxation treaty and the respective tax situation in the foreign country. The taxation models presented above may also be applicable if project companies established abroad are to be sold.