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What Executives Can Learn From The Corona Crisis. The corona pandemic poses significant challenges for superiors and decision-makers. Which characteristics count now and which lessons can be learned from the crisis. Since the beginning of March, the corona crisis has also ensured that many things have changed overnight in companies. Suddenly a large part of the workforce was in the home office or had to work under special security measures. In this exceptional situation, managers, in particular, were asked to create new structures quickly.

Survey: Many Superiors Have Coped Well With The Crisis So Far

That seems to have worked well in many places. According to a recent survey by the online job platform Stepstone, the majority of employees give their superiors good marks for their crisis management. Two-thirds believe that their manager will master the crisis in the best possible way. Sixty per cent think their boss has created a good structure for their everyday work and every second respondent said that their boss is currently paying particular attention to the mood in the team and the emotional state of his employees.

Expert draws long-term lessons for leadership!  But by no means all leaders in companies and governments have so far managed to master the COVID-19 crisis with a sense of responsibility, competence, a clear head and real sympathy observe leadership.

The Most Important Lessons For Managers From The Corona Crisis

In your opinion, what is a cardinal error in times of crisis?

It is fatal when those in charge of a crisis want to keep control over everything and over-centralize decision-making. People at the highest management level must empower the people who take on leadership roles at the forefront of a crisis to act independently. For this purpose, orientation must be created through exact values ​​and principles. If decisions are made according to these principles, any errors may not be punished.

What role does time play in such a situation?

A crucial one. The corona crisis has already taught us that countries have gotten the most lightly of it so far, whose governments take drastic measures against the spread of the virus at an early stage. Quick and decisive action by managers in such an acute crisis – without wasting time – is, therefore, an essential lesson that we should take with us. This also means giving preference to speed over perfectionism when making decisions. First of all, the stabilization of the situation and damage limitation is paramount. Then it is crucial to prepare for the time after the crisis. Quick decisions are not always made for all employees and those affected. This is to be expected.

Nevertheless, leadership requires having the courage to do the right thing. Capable leaders also communicate lousy news and uncomfortable truths when necessary, and they don’t shy away from making potentially unpopular decisions, regardless of whether their job depends on it. Effective crisis management requires strengths such as determination, accountability and moral courage.

Many employees are worried – for their health, but also their job and financial security. How should leaders address these fears?

Empathy and empathy are essential in an environment that is characterized by emotions and fears. Through clear, frequent and empathic communication, managers can show real interest and signal that they care about their employees and their situation.

Income Tax Aid Association: This Is How Membership Is Worthwhile! For some taxpayers, annual income tax compilation is pure torture. As a result, many people who are not required to file a tax return do without it—and thus giving away money, because on average employees receive a tax refund of around 1000 dollar every year. An alternative is a membership in an income tax aid association. The employees of an income tax aid association are competent contacts when it comes to tax returns and is usually cheaper than tax advisors – but are not allowed to offer all the services that a tax adviser is allowed to offer.

How does an income tax aid association work?

A wage tax aid association mainly advises employees, but also the unemployed, retirees, retirees or recipients of maintenance payments within the scope of its authorization. The membership fees are socially graded according to the income of the members. There is also a one-time membership fee for the association. For the annual fee, you can use the full range of services of an income tax aid association and get advice from experienced, specialized employees—all year round. For an income tax aid association to be able to advise a taxpayer, the latter must have income from non-self-employed work (employee), from pensions or maintenance payments. Besides, the additional income from leasing, speculative profits and capital assets may not total more than 13,000 /  26,000 (individual assessment / joint assessment of spouses). Also, income tax aid associations are allowed to advise taxpayers who receive expense allowances from the public purse or who receive the tax-free trainer lump sum of 2,400 dollars for part-time activities.

TIP: A wage tax aid association is not allowed to advise traders, farmers, foresters and freelancers. Anyone who operates a photovoltaic system as an employee or pensioner and feeds the electricity generated into the grid of an electricity provider for a fee (= commercial income) does not receive any help from an income tax aid association. He has to look for a tax advisor who can help him with the preparation of his income tax return.

When do I benefit from an income tax aid association?

Benefit from membership in an income tax aid association if you are an employee, pensioner or pensioner, as income tax aid associations specialize in preparing income tax returns as part of their advisory powers. These services are provided for a relatively low annual membership fee, no matter how often you need the income tax aid association. As a rule, the counsellor at an income tax relief association will give you some homework on what documents you need to gather at home to prepare the income tax return, and that’s it for you. The tax aid association will fill out the tax return and check the tax assessment for you. You only have to put a signature on the tax return, and you have no other effort with your tax return.

Tax software, tax advisor or income tax aid association?

The wage tax aid association is an excellent middle ground between tax software and tax advisor: Compared to commercially available tax software, the costs for a wage tax aid association are a little higher – but the specialists do most of the work for you. Compared to the tax advisor, in turn, the income tax aid association is a technically equal but significantly cheaper alternative.

CONCLUSION: Advice from an income tax aid association is incredibly worthwhile for those who do not want to deal intensively with their income tax return, but still want to achieve maximum tax savings with a manageable financial outlay.

Six Rules For Home Financing. Interest rates are historically low, but the house and apartment prices are rising. If you want to fulfil your dream of owning your own home, you have to plan carefully and with foresight. Most people have their own home at the top of their wish lists. Fulfilling your dream is more tempting than ever: everyone has been talking about historically low building interest rates for years. A loan for your property is cheaper than ever.

Planning with a sense of proportion

This shows that low-interest rates are one thing; market developments are another. So you get little of your around 1 per cent building interest if you have to finance horrendous purchase prices with it. Besides, the higher the purchase price, the more likely it will be a follow-up financing. Whether interest rates will then be as low as they are today is another matter. Anyone who wants to have a bit of planning security here is well advised to conclude a home loan and savings contract early on.

Despite or maybe even because of the low-interest rates, the following applies: Real estate financing must stand on solid feet and be planned with foresight – with these six components:

1. Bring sufficient equity

With substantial financing, the equity ratio for owner-occupied homes should be at least 20, better still 30 per cent, despite low-interest rates, advise consumer advocates. Here, among other things, the early conclusion of a building society loan agreement is suitable, which ensures not only a systematic build-up of equity capital but also low-interest rates. The more funds the borrower brings with them, the more favourable terms they can expect.

Nevertheless, interested parties have to compare well. A few thousand euros more equity capital can lead to significantly lower interest rates for one bank but only have a slight or no effect on the other.

2. Fix favourable interest rates for as long as possible

Anyone who has got hold of perfect conditions should secure them for as long as possible. Or make provision with a home loan and savings contract. Some lenders offer fixed interest rates for 15 or even 20 years.

Good to know: Nevertheless, the borrower can always terminate his contract ten years after the loan has been paid out in full, giving six months’ notice without risking a prepayment penalty.

3. Use interest savings to repay

What borrowers are currently saving in loan costs, they should invest in higher repayments right from the start—clear advantage: The loan is repaid more quickly this way. A repayment rate of at least two per cent is recommended as a guide.

4. Stay flexible

The loan must adapt to life and the economic changes that come with it, not the other way around. Therefore, the loan agreements should allow the following as possible:

  • Repayment rate change also during the fixed interest rate
  • Regular special repayments
  • Combinations with government subsidies

5. Don’t forget additional costs

The ancillary purchase costs can quickly amount to around ten per cent of the purchase price. Even the real estate transfer tax is between 3.5 and 6.5 per cent, depending on the federal state. Also, there are the fees for the notary and the land registry and, under certain circumstances, a broker’s commission.

Stable long-term financing must also include the running costs for the property – electricity, heating, insurance, maintenance – from the outset.

6. Secure an emergency

A loan binds you for a long time. The instalments have to flow month after month. But what if, for example, one of the earners falls ill for a long time or even dies? Borrowers take out occupational disability or term life insurance to ensure that the family does not have to sell directly.

The Best Tax Tips For Entrepreneurs, Self-Employed And Freelancers. The self-employed and entrepreneurs often pay too much income tax. The reason for this is just as simple as it is paradoxical: the possibilities of deducting expenses from tax to reduce profit are so varied that even seasoned entrepreneurs rarely think of everything. What is meant are not half-silly tax-saving constructions, but very legal deductible expenses that arise in the context of entrepreneurial activity.

  • Ride costs: Do you use your car almost exclusively (more than 90 per cent) for work? In this case, the car is a piece of work equipment. This means that all expenses (depreciation, interest, fuel, insurance, etc.) are deductible as business expenses. What costs you can apply and what you should pay attention to so that the auditor does not have any objections!
  • Entertainment expenses: Business is done while eating! This sentence is one of the oldest business wisdom. And because the tax authorities know this too, you can claim a large part of the entertainment costs for your customers or employees as business expenses. The most crucial basic rule: For the tax office to recognize the costs, they must be reasonable and plausible. What else you should pay attention to when it comes to entertainment costs
  • Travelling expenses: With the 2014 travel expense reform, not only was the term “regular place of work” replaced by “first place of work” – but some things have also changed in terms of taxation. As of 2014, the first place of work will be not only a permanent establishment of the employer, but also that of a third party appointed by the employer (e.g. outsourcing, longer project work at the customer, etc.). The new provisions have a significant impact on the tax treatment of travel expenses and the deduction of expenses in the case of double housekeeping.
  • Low-value assets: When you buy machines or cars for your company, you usually write off the purchase price over several years. But that’s not worth it when buying items that cost comparatively little. Therefore, the tax office accepts a simplified depreciation for it. But be careful: There are also different variants here! Which items you can write off as a low-value asset and what you should consider. When it is beneficial to create a collective item and when the immediate deduction is the better choice.
  • Gifts to business partners and employees: Small gifts keep a friendship alive – and sometimes customers or experienced employees too. If you show your appreciation to business partners or employees, you can book part of the costs as business expenses. Which gifts you can claim for tax purposes as business expenses, which record-keeping obligations exist and why compliance with the exemption limit is so important.
  • Workspace: As an entrepreneur, you can claim the cost of a study in your house or apartment under certain conditions as business expenses.

The costs are unlimitedly deductible if the office is either a permanent establishment or the focus of your professional activity. If this is not the case, but there is no other workplace available to you for your work in the study (e.g. because there is no accounting office in your workshop or warehouse) Which costs you can deduct and which requirements the tax office requires for the recognition of a study.

  • Write off company building: If you use office, production or warehouse buildings for business purposes to generate income, you can deduct the acquisition or manufacturing costs from tax. It does not matter whether you work commercially, as a freelancer or not self-employed. What options you have (straight-line or degressive depreciation) and what else you should consider when dealing with the tax office.
  • Employment contracts with family members: The word “family business” says a lot about the structure of many small and medium-sized companies. When everyone contributes to their skills, it is a pleasant and often successful thing. Besides, employment contracts with your spouse or other close relatives also bring you financial advantages and tax structuring options. In the case of special tax-free allowances, for example, the company benefits from deductible business expenses and the family member from tax-free income. However, when it comes to employment contracts with relatives: Don’t overdo it, how you can benefit and still stay on the safe side from a tax point of view.
  • Investment deduction: The investment allowance can be of interest to entrepreneurs, especially in perfect business years. If you have made significantly more profits than you expected, this tool can help you reduce operating profit and save money for future investments. Under what conditions and in what amount you can use the investment allowance.
  • Provisions – for example, for the pension:  As an entrepreneur, in particular, you should plan your retirement provision in good time – including your company pension. As a managing director, for example, you have to set the course for your pension at least ten years before your planned retirement and set up corresponding provisions in the balance sheet (otherwise the tax office assumes a hidden profit distribution). Your tax advantage: You can deduct the provisions directly from profit, so you pay less tax. 
  • Own receipt: Lost the restaurant bill? Or the fuel receipts from the last trade fair? This is annoying because the tax office usually does not recognize these expenses without a receipt. But there is a way out: In individual cases, you can fill out your receipt as a replacement for the lost receipts. You should make sure that the self-receipt contains the same information as possible as the originals (i.e. payee, amount, date, the reason for payment, etc.). Your signature on the – promptly completed – self-receipt is also helpful
  • Accumulation benefit. Suppose you are among the higher earners and your income tax rate is well over 40 per cent. In that case, there is a tax-favourable alternative for sole proprietorships or partners in a commercial partnership: Do not take profits. The tax office only requires a tax rate of 28.25 per cent for profits that are not withdrawn (retained). 
  • Use family members to save taxes. Suppose you do not employ family members for more than two months or 50 days a year. In that case, you can save a lot of taxes: For this form of very limited, short-term employment – for example for the inventory or the Christmas business – there are various options for tax lump sums, both for You as well as your family members can be of benefit. 

Make Your Tax Return: The Best Tips! Some employees who are not required to submit a tax return shy away from the costs of a tax advisor and thus often forego a tax refund. The reason: In 9 out of 10 application assessments, there is a money back. The way out: do your tax return. This is no problem with the right tips and tools – and as a tax layperson, you don’t have to get anxious about the tax office even if you make a mistake.

TIP: Grab it and get your money back. Here we’ll try to show you how easy it is!

Make Your Tax Return: When It’s Worth The Effort

Especially for employees from whom the tax office does not expect a tax return, it is usually worthwhile to do a tax return yourself. Because on average, taxpayers with an application assessment receive almost 1,000 of your money back. This is substantial because the tax office only deducts the lump-sum rates or allowances from all tax-reducing expenses (e.g. advertising costs, certain expenses, pension expenses, extraordinary burdens, but also membership fees, donations, etc.). If your expenses are higher, you can only claim them in a tax return; otherwise, they are ignored.

And: Those who shy away from spending on tax consultants or income tax aid associations can also do their tax return. This is not rocket science and is incredibly worthwhile in the following cases:

  • If you have very high advertising expenses and you exceed the flat-rate amount for advertising expenses.
  • When your extraordinary burdens are exceptionally high.
  • If you are married and have chosen the tax bracket combination IV / IV despite very different incomes.
  • If you have expenses for household-related services or manual work.
  • When you employ domestic help.

Your employer cannot take such expenses into account when calculating your monthly wage tax and the annual wage tax adjustment at the end of the year. Therefore, it is expected that these costs will result in a tax refund when you file a tax return. As an employee, you can do the tax return yourself without any difficulties. However, employees and self-employed persons who are subject to income tax can also file their tax return.

Making Your Tax Return Is Easy

The application assessment (if you are not obliged to make a tax return) does not require any special knowledge of tax law and no separate application. It is sufficient to submit a tax return. A simplified tax return is also sufficient. The form required for this has just two pages so that you can easily do the tax return yourself. In addition to the data from your electronic income tax card, enter the amount of the corresponding costs in the form. You must sign this form and, if necessary, send it together with supporting documents to the tax office will be in charge of your place of residence or hand it in personally.

Make your tax return by types

But even if you are required to submit an income tax return, you can do your tax return. As a private person, you can choose between using the tax forms that you can obtain from the tax offices and local authorities or filing your tax return electronically.

You can carry out this procedure with the help of the complicated software without the help function of the tax authorities, or you can use professional tax software. 

With these programs, even as a layperson, you can quickly and safely submit a tax return that is correct in terms of content and, above all, tax-optimized concerning your expenses. The end of the operation, the tax return is electronically transmitted to the tax office via the online tax office system.

If you would like to do your tax return yourself, the use of comfortable tax software such as tax compliance software programs or another solution from our tax software test is ideal. The software guides you the most comfortable way step by step through your tax return and gives you detailed explanations for each point. You will also receive tips on which tax-saving options you can use. Detailed instructions remind you to consider individual points; alternative calculations contribute to optimization. Some programs show you the expected current tax refund or additional demand from the tax office in the course of the entries.

Retirement Without Debt. Whoever buys or builds is often 35 to around 40 years old. With properly thought out financing, retirement without loan payments is entirely possible.

Many people want to move into their own four walls at some point so that they no longer have to pay rent in old age. However, this plan only works if the loan for the house is paid off by the time you retire. Since many nowadays only start their home project in their mid-30s to early 40s, for professional or private reasons, things can get tighter depending on the property and financing volume.

Seven tips for financing:

  • Equity Investment: With stable financing, the equity ratio for an owner-occupied home should be 20 to 30 per cent of the purchase price and also cover the ancillary costs – such as a notary, real estate transfer tax, and possibly broker.
  • The Correct Repayment Rate: It’s the real key to the debt-free home. Because the higher the rate, the faster the loan is paid off, if it fits into the budget, it should be more than two per cent. From the age of 50 at the latest, the client should then do another all-round check. How much is the remaining debt? When is retirement planned? Do I have to and can I, for example, turn the repayment amount again to get rid of all debts by then?
  • The Monthly Charge: A high repayment is all well and good – but the homeowner must also be able to afford it. As a rule of thumb, including all additional costs for the house, the monthly charge should not be more than around 30 per cent of the regular net.
  • Involve The State:  There are often good opportunities to use financial injections from the state when building or buying a house. Sponsors, for example, energy-saving new buildings or renovation measures, burglar protection or age-appropriate conversions in the form of grants or low-interest loans.
  • Fixed Interest Rate: If the financing level is still low, as is currently the case, the mortgage lenders should fix the conditions for as long as possible to obtain more planning security and reliability. Fifteen years and more are useful. Besides, follow-up financing can also be prepared with a home loan and savings contract – with the low-interest rate secured for later.
  • Use Special Repayments: Good loan agreements allow outstanding annual repayments of up to five per cent of the loan amount—those who can take advantage of these options put in an additional debt relief turbo. For example, inheritances or bonuses from employers are suitable for this.

Adapting property to live: This is also a possible strategy: With a view to retirement, the large house, in which, for example, the children also found space, is sold and replaced by a smaller and barrier-free apartment. This fits better with the living situation. Besides, you save pending – and possibly costly – maintenance work on your previous home. NOTE: This is not a zero-sum game. Even with the smaller apartment, there are ongoing ancillary costs such as garbage disposal, property tax or property management, which must be included in the monthly budget.

Corona Crisis: What Property Owners Need TO Know Now. The corona crisis is also affecting property owners, landlords and home builders—answers to the most critical questions.

There are lots of companies that have registered short-time work for their employees since the beginning of the corona crisis. Many employees are afraid of unemployment, and thousands of self-employed are worried about orders and customers. The financially insecure situation also affects many property owners, home builders and landlords.

What if I can no longer pay the instalments for my mortgage lending due to short-time work or the loss of self-employed contracts?

First, you should contact your bank immediately and not just stop making payments. Anyone who gets into a financial need as a result of the corona pandemic can defer their due instalments, interest payments and repayments for construction financing. The rule applies to consumer loans and real estate loans till planned day. -it could change all over the world

IMPORTANT: The interest and repayment payments are only deferred – not waived. The instalments due must be paid later and extend the loan agreement accordingly.

Is it possible to temporarily adjust the repayment rate for my mortgage loan?

Many banks and mortgage lenders are currently offering their customers the option of suspending repayments or interest payments for a time. Anyone who has agreed on a repayment rate change in their mortgage lending contract can change the repayment amount and adapt it to their current financial situation – for example, the new amount of family income due to short-time work.

DISADVANTAGE: By lowering the repayment rate, it takes longer for the loan to be paid off. And usually, only one repayment rate change is possible.

TIP: It is best to clarify with your advisor or mortgage lender in advance, whether it is possible to change the repayment rate again after the crisis.

I own multiple condos. A tenant cannot currently pay his rent. What now?

If your tenant has got into financial difficulties as a result of the pandemic, for example, because he has lost his job, is on short-time work or is about to go bankrupt if you a freelancer or self-employed person, you are currently not allowed to terminate him due to the arrears in payment. This is what the federal government has stipulated in its “Law to Mitigate the Consequences of the Covid 19 Pandemic”. As a landlord, you have to accept a deferral of rent payments and ancillary costs until the last day. If you as a landlord are affected by deferred rental payments, you can apply for tax relief, for example, the deferral of due taxes at your tax office.

What effects does the corona crisis have on building owners?

In general, construction companies and manual workers are allowed to continue working in compliance with the hygiene and distance rules. However, since many construction companies employ skilled workers from abroad or maybe employees are sick or in quarantine, there may be staff shortages – or bottlenecks in material procurement. Building owners should, therefore, currently expect delays. The necessary approval procedures for the construction project may also take longer. The three-month grace period for the home loan also applies to everyone who is currently still in the construction phase of their property. However, you have to pay the bills from artisans and property developers.

Does it make sense to plan to buy or build your property currently?

Real estate as a real asset is an excellent and crisis-proof form of investment. Building your own house or buying an apartment is one of the most significant financial decisions of a lifetime for most people. And should therefore always be planned and well prepared for the long term. The corona pandemic does not change that. The interest rates on real estate loans are still at historically low levels. The pandemic has not yet had any substantial effects on property prices. How that will develop in the medium term is currently difficult to predict. If you are planning a property for your use or as a long-term investment, you can now continue your search for a suitable property. However, many apartments and house tours are currently digital. As a rule, however, on-site visits are also possible in compliance with the distance and hygiene rules.

Crucial When Planning Mortgage Lending

Every borrower should have a safety cushion. This reserve for lean financial periods – for example, due to unemployment, illness or even family time – should amount to at least three net salaries. The current situation shows: When financing your real estate, pay attention to flexible conditions that allow repayment breaks, changes in the repayment amount and outstanding repayments.

Investing In Concrete – You Have To Pay Attention To That. Real estate is still a trendy investment all around the world. These investment type is also becoming more and more important as a capital investment and can be an exciting addition to your line-up. What questions should future investors ask themselves?

For many people, having their house is at the top of their wish list. In times of low-interest rates, however, real estate is also an excellent way to diversify private assets. Usually, investors buy property for retirement or asset accumulation as a current study. After all, houses and apartments are not only considered to be of a stable value but also promise higher returns than savings accounts and Co. In suitable locations, the owners benefit from regularly flowing rental income. Besides, landlords can pass on their so-called apportionable ancillary costs such as property tax, garbage disposal as well as property and liability insurance for the building to their tenants and thus reduce their tax burden. A few critical questions should, therefore, be clarified before purchasing.

Sound Out The Market Well

Completely refurbished old building apartment, centrally located student apartment, practical commuter apartment, modern row house for a family: a large number of different houses and apartments are available as investment properties. When making a selection, the buyers must first clarify for themselves what plans they have with the property. Do you want to rent it out indelibly or maybe move in there yourself later? It also depends on what and where to look.

If the focus is on leasing, the following questions arise:

How should the macro and micro-location of the property be assessed? They include factors such as vacancy rate, business location or economic strength, housing supply, infrastructure, migration behaviour and commuter statistics.

What is the long-term development potential of the property?

Can the rental income be achieved in the forecast amount in the long term and is the rental return secured?

If later own use is planned, the buyer should also ask the following questions:

  • In which region or city would I like to live later myself?
  • What living needs – size, equipment, comfort – will I have later?
  • Is the property also suitable for living in old age or can it be converted in an age-appropriate manner if necessary?

The location and quality of the property play a significant role in both types of buyers. It depends on whether sufficiently high rents, which are essential for returns and financing, can be achieved in the long term. However, laypeople often find this difficult to assess. For this purpose, cooperates with various carefully selected real estate providers as well as with sizeable unconnected analysis companies in the real estate industry who, as experts, provide valuable analyzes of the location, market and property.

Who will take over the administration?

That too needs to be considered: if you rent a house or apartment, you suddenly have any additional obligations. Repairs are required, the utility bill is due, tenants move out, and new ones have to be found. Will and can the buyer take on these tasks himself or would he like to hire an external property management company to get interested everything on-site?

When deciding for or against a service provider, factors such as how far away you live from the property, how much interest you have in property management yourself and how much free space your calendar allows for this. Anyone who ultimately decides on an administrator must, in a second step, carefully compare the candidates’ expertise and their prices. Often the new owner does not have to ask these questions at all, for example, if a property manager has already been appointed by the real estate provider or other owners.

Necessary Insurance For Landlords

After all, those interested in real estate have to price the necessary insurance protection into their considerations. Residential building insurance is an absolute basis. It protects the property itself and compensates for damage after a fire or storm, among other things; The natural hazard insurance protects against the consequences of extreme weather phenomena. If there are several apartments in a house, the community of owners must decide on the appropriate protection. House and landowner liability insurance are also suitable for landlords and owner associations. It takes effect, for example, when a house visitor or passer-by is injured during repair or gardening work. TIP: High-quality personal liability insurance already includes this protection. We also recommend a landlord’s legal protection insurance and life insurance, which also covers the financing

Apple wins the battle with the EU: the tax regime in Ireland is not state aid. The EU Court (EGC) delivered its decision against the European Commission in the Apple case. The US company does not have to repay $ 14.8 billion in state aid it received from Ireland.

The EU and its fight against aggressive corporate tax planning must refer to a ruling by the European Court (ECG) which identified Apple’s Irish tax regime not as “state aid”.

Apple and the Irish government have managed to overturn the controversial 2016 EU decision that Apple’s tax system in Ireland qualifies as state aid. According to the first EU decision, Apple should have paid 13 billion euros, plus a further 1.2 billion euros in interest.

The European Court of Justice (ECG) annulled the 2016 decision of the European Community stating that the Commission failed to demonstrate to the necessary legal requirements that there was an advantage under Article 107, paragraph 1. of the TFEU.

Referring to Article 107 (1) of the Treaty on a Functioning of the European Union (TFEU), the court found that the EC Competition Commission was wrong in finding that Apple’s Irish entities had been granted an economic advantage through state aid. Furthermore, it argued that the Commission has not shown that the contested tax rules were the result of the discretion exercised by the Irish tax authorities which led to a selective advantage for Apple’s Irish operations (i.e. ASI and AOE).

The decision of the EU court of justice on the apple and state aid case in Ireland

According to the General Court, the Commission should have shown that the revenue represented the value of the activities actually carried out by the Irish branches themselves, in view, inter alia, of the activities and functions actually performed by the Irish branches of ASI and AOE, by a on the other hand, and the strategic decisions taken and implemented outside those branches on the other.

If, however, the Commission had shown that the revenue of Apple’s Irish entities represented the value of the activities actually carried out by the Irish subsidiaries themselves, the decision might have been different. In this case, in fact, effective taxation of that income would have been appropriate.

However, the court expressed regret for the incomplete and sometimes inconsistent nature of the disputed tax rulings, but I stressed that in the Apple case, the flaws identified by the European Commission were not sufficient to prove the existence of a tax advantage.

The 2016 decision in the Apple case surprised almost everyone and the decision of the EU Court of Justice is no different. At the time the United States claimed that the EU was only discrimination against US companies. At the same time the Irish government was trying to defend its position with these special facilities linked to multinationals.

The result was a worldwide debate over whether Ireland had granted the company illegal tax benefits and as a dividing line between tax incentives and state aid. This decision may not have resolved this debate, especially as the EU Court of Justice has now set an important precedent in international tax law.

The controversial issue of state aid to multinationals

Both the Irish authorities and Apple have strongly denied any wrongdoing since the EU Competition Commission launched its state aid investigation and concluded under the leadership of Margrethe Vestager. The moot point was whether the Irish tax decisions granted to Apple in 1991 and 2007 violated EU state aid law or not.

The European Commission argued that these rulings gave Apple an unfair advantage over other companies. These aspects have allowed the American company to direct its profits from European sales through its Irish branch to an office located in a tax haven.

This is how the company posted profits of € 22 billion in 2011 and paid taxes of just € 50 million in Ireland, according to US Senate hearings. The European Competition Commission has argued that Apple’s effective tax rate in Ireland fell to an all-time low of 0.005% in 2014.

However, the American company claims that this rate is misleading because it includes Apple’s global revenue, and the global effective tax rate was 24.6%. The dispute over where Apple should pay taxes is part of a larger economic picture, however.

Apple has operated in European markets through Ireland for decades. The company first started the Irish business in Cork in 1980 and today has over 6,200 employees in the country, but the operation had a double structure: an operational headquarters parallel to the production plant.

Ireland as a gateway to Europe for US companies

At the time, the Irish government was looking to reposition its economy as the best entry point in Europe for US businesses and redesigned its tax system to attract foreign direct investment (FDI). To date, however, we can say that the Irish tax model has managed to attract both investments and disputes.

The Irish government approved Apple’s dual structure and allowed the company to operate at a very low tax cost. The company has long pointed out that its shares were above the limit and in line with tax law. However, it has always reiterated that it would move its operations to the United States if the corporate tax rate was reduced there.

In fact, after the Tax Cuts and Jobs Act (TCJA) was passed in 2017 in the US, Apple expanded its operations in the United States and transferred $ 250 billion to its home country because corporate income tax is was reduced by 21% and because a special (reduced) rate for repatriation was introduced.

The current situation of Apple

The decision by the EU Court of Justice is a great victory for Apple and the Irish government, but the business world has changed dramatically since the start of this case. This court decision may be of comfort to taxpayers, but the international situation is still complex.

Many tech companies restructured before the final verdict, including Google, precisely because Europe agreements aren’t what they used to be. Just think of the situation of the tax system known as “the double-Irish”. This structure, valid for many years, has now lost its appeal, as the United States has transformed its tax system to convince American companies to bring their investments “home”. The combination of tax scandals and controversies has accelerated changes in global fiscal policy.

In the same period, the OECD and the EU pursued a series of tax avoidance measures to reduce the shift in profits and the erosion of tax bases (EU BEPS project). The world of taxes has changed dramatically since the EU launched its investigation into Apple in 2013.

Businesses have had to adapt to the new international tax environment. However, this does not mean that there are no more opportunities for companies to reduce their tax rate; however, in different ways than in the past.

The new debate is where businesses should pay taxes (see the case of digital businesses), not so much if they pay enough. However, the business community will be eager to find cheaper ways to adapt despite having known for several years that substance testing has raised the bar.

Tax planning in the international arena

The aforementioned sentence, as anticipated, represents an important precedent in an uncertain international situation. The situation where even today many multinationals continue to exploit the favourable tax regimes implemented by some states with the aim of promoting the activities and offices of multinationals, reaching advantageous tax agreements for these companies.

For some States, in fact, being considered as the “gateway” to Europe for foreign multinationals is more important (at an economic level) than the possible direct tax revenues they can obtain. It is in this context that, in recent months, the international debate on the taxation of the digital economy is becoming more stringent.

State of source: a guide to the taxation principle. The rules are deriving from the principle of taxation of income in the source State—problems of double taxation of income and international treaties.

Income taxation under the source state principle provides for the taxation of income arising from sources located in that jurisdiction. This principle applies to income from real estate, dividends, interest and royalties. Usually, the source state taxation principle integrates with the worldwide taxation of income-generating possible phenomena of double taxation of income.

When it comes to income produced abroad by a tax resident in our country, we know that the general rule of taxation, established by Article 2 of Presidential Decree no. 917/86 is the worldwide taxation principle (so-called “worldwide taxation principle”). On the basis of this provision, all income received, including foreign ones, must be subject to taxation in Italy.

It is essentially one of the key provisions of our tax system. However, in some cases, it can be applied alongside the principle of income taxation in the source state.

The classic case is that which derives from the rental income of a property held abroad by an Italian person. In this case, these fees are subject to taxation abroad, according to the principle of taxation in the source country, but also in Italy by virtue of the principle of taxation on a worldwide basis. When we are faced with situations like this, we have to solve the problem (double legal taxation), through remedies that are usually: exemption or credit for foreign taxes.

In this article, I want to analyze in which particular cases the taxation in the source State is applied and how this must be harmonized with the general criterion of world taxation of income.

The principle of taxation of income in the source state

According to the principle of taxation in the source state, a state is subject to taxation that income which originates from sources located in its jurisdiction. This, regardless of whether such income is attributable to resident or non-resident individuals.

With reference to non-resident subjects, in order to apply the principle of taxation in the source State, national laws must identify the domestic sources of income that constitute the tax base for non-resident subjects.

The law must also establish the rules that determine the amount of income that is considered to derive within the jurisdiction of that state. The categories of income attributable to non-residents generally taxable in the source state are identified below.

Which income categories are subject to unlimited taxation in the source state?

This method of taxation of income in the source state generally applies if the latter derive from:

-Real estate properties, located in the source state, which have been provided for income;

-Profits realized by a permanent establishment of a company located in the source State;

-Remuneration deriving from employment contracts in the private sector for the activity carried out in the source State (according to tax treaties, generally applied only if the recipient is present in the state for more than 183 within a period of 12 months ).

The assessment of taxation in the state of the unlimited source is made on a declaratory basis, or with the presentation of a tax return: gross income, net of deductions and other deductions, is taxed by applying the normal tax rates for individuals physical or legal. The non-resident, the natural or legal person, is personally responsible for the tax to be paid.

The problem, in the case of unlimited application of taxation in the source State, may be the fact that the criteria that establish the tax obligation (the rules of the source) are not or are insufficiently established.

For example, only a few states provide for a definition of a permanent establishment according to internal law (the concept is generally defined in the context of tax treaties). Furthermore, if there is a definition, they may vary from state to state, or there may be discrepancies or inconsistencies between internal rules and the rules of other states.

Which income categories are subject to limited taxation in the source state?

Limited taxation in the source state generally occurs in the case of applying a withholding tax to:

-Dividends paid by a company resident in the source state to a non-resident parent company or to a series of non-resident investor shareholders (obviously the profits made by the company are fully taxable in the source state since the subsidiary company is resident in that state). For example, in Italy, the withholding tax applicable to dividends is 26%.

-Interest paid by a company resident in the source state to a non-resident parent company;

-Royalties paid by a company resident in the source state to a non-resident parent company.

In the case of Italy, the withholding tax applicable to interest is 12.5% ​​or 26%, and in the case of royalties, the withholding tax is 22.5%. In some cases, the withholding tax can also be applied to emoluments paid to members of the Board of Directors of non-resident companies.

Generally, taxation in the state of limited source is applied through withholding tax. The person who distributes dividends and pays interest or royalties (i.e. the company or a bank) must operate the withholding, generally, applying it to the gross amount of income. The tax burden, however, is borne by the foreign recipient.

Allocation of income

Once an income attributable to non-resident persons has been classified within the categories of taxable income in the source State, it is necessary to establish the rules that determine the taxable part that is to be considered attributable to the state of the source itself. These rules, known as “income allocation”, can lead to significant discrepancies between states, as well as double taxation.

This occurs, for example, if a state considers a share of income attributable to a permanent establishment, while the other state does not recognize this attribution. Other distortions can be caused by differences in the deductibility of particular types of expenses. It should also be emphasized that the application of taxation at source must not be confused with the territorial system.

Pay rule and use rule rules

Income that is taxable in the recipient’s state of residence (i.e. based on the principle of worldwide income taxation) may also be taxed in the source state, based on the source of income definition rules established in that state.

It is important to determine within what limits and under what conditions, according to internal rules or bilateral rules or a combination of the latter two, the income is presumed to derive from that state and, therefore, can be subject to limited taxation. The rules of the source are not always the rules that define the jurisdiction to which the right to tax is recognized.

The source issue may also be relevant if the source State does not have taxation powers. For example, in many states, the application of source rules to income received by residents also has the function of clarifying whether these specific incomes are to be considered domestic or foreign source income for the purposes of applying the double taxation treaties. Generally, internal laws establish distinct rules for each individual income category.

Compensation from employment, emoluments and other types of payments must be classified according to a certain income category and, only subsequently, will it be established which source rules will apply in relation to that income category.

Source income rules

The rules of the source of an internal nature are generally of three types:

The presumption that an income derives from a State if it is paid by a resident of that State (pay rule); the pay rule is present in many states;

The presumption that the income originates in the state in which the assets are located, to which the payment of a price for its use (for example, the right to use a patent) is attributable (use-rule); this rule applies, for example, in the United States of America;

A combination of the rules mentioned in the previous points. For example, it can be established that an income does not derive from a State if the goods from which the price is deducted are used outside the state itself, although the payment is made by a person resident in that state.

Withholding taxes

Withholding taxes can be applied to a wide range of payments, including dividends, interest, royalties (including, at times, lease payments), fees for technical assistance or services, management fees and consultancy fees. In fact, any type of payment could be subject to withholding tax.

When received by a company, these items of income normally acquire the characteristic of business income for the recipient. However, this does not prevent the source State, in a transnational context, from reclassifying this income in a different category for tax purposes (unless the recipient has a permanent establishment in the source State to which the income in question is allocated).

For a non-resident company to be subject to tax or a withholding tax to it, a certain source of income must be located or presumed to be in the source state. The criteria for identifying the source, based on the internal rules of the States, are as follows:

Dividends

According to the rules established by most states, the source of dividends is the place of residence of the company distributing the dividends (pay rule).

In the United States it is also relevant to determine where the distributing company has formed its profits. If a US company, in the three years prior to the distribution of dividends, earned at least 80% of its income from foreign sources, only the portion of dividends attributable to income formed in the United States is subject to withholding tax on dividends of 30%.

Conversely, a non-US company with 25% or more of its income actually related to a US business or business formed in the last three years prior to the distribution of dividends to non-US shareholders is subject to 30% US withholding tax. if the dividend is attributable to income from US trade or economic activity.

Interests

The most commonly applicable source criterion is the place of residence of the interest payer.

Other criteria may be those of the state where the loan from which the interest is paid is used, the place where the interest is paid, or the place where the lender can deduct the interest expense paid (or from the profits of a building organization).

Royalties

The most common criterion is that of the place of residence of the person who pays the royalties.

Another important criterion is that relating to the state in which the rights or immovable property from which the payments of royalties or rents derive (for example, the United States of America) are used.

A further criterion is that of the state in which the payer can deduct the royalty payments, or where the royalties are paid (for example in France).

Technical advice

Similar rules, regarding source recognition, may apply to fees for technical assistance, services and professional advice. These types of income paid to non-resident companies are, for example, taxable in a number of Asian states (India, Malaysia, Pakistan) and Latin America (Argentina and Brazil) when paid to non-resident individuals.

This generally entails major problems in practical application: since according to most treaties, withholding taxes cannot be applied to this type of income unless the treaty contains special clauses, the source states try to safeguard their tax rights, assimilating this type of payment, for the purposes of the treaty, to royalties.

Although this practice is not compatible, for example, with the treaties entered into in accordance with the OECD model, it is generally extremely difficult to convince the tax authorities of these states to waive the application of such withholding taxes.

Implications of the source principle

Some further implications deriving from the application of the source principle are the following:

The principle of taxation in the source state is important not only in order to determine the extent of the tax obligation of non-resident individuals. In fact, the principle is also applied by the state of residence of the taxpayer to apply the methods to eliminate double taxation. This can result in double taxation in the event that the state of residence does not recognize the rights of the other state to tax certain income if it claims that, according to the internal rules of the state of residence, there is no source of income in the other state;

The application of taxation in the source state is of particular importance in determining whether a state can apply a withholding tax. For example, there may be a case in which it is necessary to determine whether the interest due for a loan used by a permanent establishment of a foreign company is subject to reduced withholding tax pursuant to a tax treaty concluded by the state in which the permanent establishment is located. . It is important to clarify this and other similar issues, bearing in mind that a permanent establishment in general is not a subject to which the benefits of tax treaties can be recognized.

Tax planning

In order for it to be possible to affirm the existence of a tax obligation of a non-resident taxpayer for income from domestic sources, it is necessary that the sources of income taxable in that state are explicitly identified by the laws or regulations of that state. This implies that sources of income that have not been individual as such cannot entail any taxation on a non-resident person.

A typical example of planning based on the source of income discrepancy is the treatment of capital gains arising from the sale of a UK property by a non-UK resident.

Such capital gains are not taxable in the UK to the extent that the real estate is not part of a UK-based company. This is because such capital gains are not recognized by UK law as a source of taxable income for a non-resident person. In the event that the owner of a property is resident in a state that recognizes the exemption for income from foreign sources, as an internal measure for the elimination of double taxation, in this case, the final result would be the absence of taxation both in the state of the source (United Kingdom) and in the state of residence of the seller.

This fact depends on the application of measures against double taxation in the country of residence of the recipient, or by replacing the exemption method with the credit method.

Tax authorities tend to avoid such an extensive interpretation of source rules. Therefore, careful planning is necessary not only in relation to the tax obligation in the source State but also in the state of the taxpayer’s residence with reference to the methods of eliminating double taxation.

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