German Rules on Corporate Expatriations

1. German Rules on Corporate Expatriations 16 April 2009 Klaus Sieker Sieker/09031001.ppt

2. German Rules on Corporate Expatriations A. German rules on corporate tax residence B. Consequences/potential disadvantages of German tax residency C. Corporate expatriations from Germany D. Objectives/benefits of corporate expatriation from Germany E. German tax consequences of corporate expatriation F. Direct/indirect expatriation within the EU/EEA G. Direct/indirect expatriation outside the EU/EEA

3. A. German rules on corporate tax residence • Whether organized under foreign or German law a corporation is tax resident in Germany if it either maintains its • Statutory seat or • Place of management in Germany • “Seat” refers to the statutory seat as per the articles • Place of management is defined as the place from where instructions in regard to the day to day–operations are issued

4. B. Consequences/potential disadvantages of German tax residency • Worldwide income subject to German tax • Non-resident corporations subject to German tax only with certain German source income • Dividends paid subject to 26.375 % withholding tax • No (German) withholding tax on dividends paid by non-resident corporations • Resident corporation is subject to Germany‘s CFC Rules • Non-resident corporations are not • Sale of shares in German tax resident corporation is subject to 26.375 % capital gains tax • No German capital gains tax on non-resident sellers selling shares in a non-resident corporation • 10 % or greater participations in resident corporations subject to German gift/inheritance tax regardless of residency of donor/donee/decedent/heir • Participations in non-resident corporations escape German gift/inheritance tax provided that donor/donee/decedent/heir are non-residents

5. C. Corporate expatriations from Germany (1) • Expatriation = relinquishing German tax residency • No transfer of operations (other than top management) • Expatriation (in a strict sense) requires that the German corporation transfers both • Its statutory seat and • Its place of management • Transfer of statutory seat permissible (under corporate law) for a GmbH and a SE (within the EU) but not for an AG • Expatriation (in a wider sense) achievable by means of a corporate reorganization (share for share exchange, cross-border merger)

6. C. Corporate expatriations from Germany (2) Direct Indirect Luxembourg Germany Luxembourg Germany Neue Deutsche Bank SA Allianz SEBoard/Vorstand Deutsche Bank AG

7. Benefits for the expatriating corporation Escape CFC taxation Additional opportunities for implementing structures saving taxes in countries of operations Benefits for the shareholders of the expatriating corporation Escape capital gains tax Escape gift/inheritance tax D. Objectives/benefits of corporate expatriation from Germany

8. E. German tax consequences of corporate expatriation • Depends on • the method of expatriation (direct or indirect) • the destination (within the EU/EEA vs. outside the EU/EEA) • Corporate level • Exit charge • Losses carried forward • Real estate transfer tax • Shareholder level • Capital gains tax charge

9. F. Direct expatriation within the EU/EEA (1) • Gain recognition required unless assets of the corporation remain attributable to German PE • Presumption that participations and intangibles are attributable to head office • Losses carried forward remain intact • No RETT Luxembourg Germany Allianz SEBoard/Vorstand

10. F. Direct expatriation within the EU/EEA (2) Shareholder level • No gain recognition in case of shares in a SE • In other cases gain recognition required unless Germany’s right to tax shareholder with capital gain is not affected Luxembourg Germany Allianz SEBoard/Vorstand

11. F. Indirect expatriation within the EU/EEA (1) BeforeAfter Corporate level • No gain recognition • Losses of Deutsche Bank AG and its German subsidiaries are extinguished if Neue Deutsche Bank SA acquires more than 50 % of Deutsche Bank AG • If Neue Deutsche Bank SA acquires 95 % or more of the shares in Deutsche Bank AG, RETT is triggered Shareholders Shareholders Deutsche Bank AG,Germany Neue Deutsche Bank SA,Luxembourg Deutsche BankAG, Germany

12. F. Indirect expatriation within the EU/EEA (2) BeforeAfter Shareholder level • Upon application gain recognition not required if Neue Deutsche Bank SA acquires more than 50 % of the shares in Deutsche Bank AG Shareholders Shareholders Deutsche Bank AG,Germany Neue Deutsche Bank SA,Luxembourg Deutsche BankAG, Germany

13. G. Direct expatriation outside the EU/EEA Corporate level • XYZ Inc. organized under Delaware law having its place of management in Germany • Management moves to the USA • Gain recognition required (whether or not German PE is retained) • Losses? • No RETT Shareholder level • Gain recognition required unless Germany’s right to tax shareholder with capital gain is not affected USA Germany XYZ Inc.Board

14. G. Indirect expatriation outside the EU/EEA BeforeAfter Corporate level • Same rules as for expatriation within EU/EEA Shareholder level • Mandatory gain recognition Shareholders Shareholders Deutsche Bank AG,Germany Neue Deutsche Bank AG,Switzerland Deutsche BankAG, Germany

15. Contact: Dr. Klaus Sieker E-Mail: klaus.sieker@fgs.de BONN Johanna-Kinkel-Straße 2 - 453175 Bonntelephone: ++49(0) 2 28 / 95 94 - 0telefax:++49 (0) 2 28 / 95 94 - 100 E-Mail: bonn@fgs.de BERLIN Friedrichstraße 6910117 Berlin telephone:++49(0) 30 / 21 00 20 - 20 telefax:++49(0) 30 / 21 00 20 - 99E-Mail: berlin@fgs.de FRANKFURT AM MAIN Platz der Einheit 160327 Frankfurt/Maintelephone:++49(0) 69 / 71 703 - 0telefax:++49(0) 69 / 71 703 - 100 E-Mail: frankfurt@fgs.de MÜNCHEN Brienner Straße 2980333 Münchentelephone:++49(0) 89 / 80 00 16 - 0telefax:++49(0) 89 / 80 00 16 - 99 E-Mail: muenchen@fgs.de