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

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

3. 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. 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. 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. 6 C. Corporate expatriations from Germany (2) Direct LuxembourgGermany Allianz SE Board/Vorstand Indirect LuxembourgGermany Neue Deutsche Bank SA Deutsche Bank AG

7. 7 D. Objectives/benefits of corporate expatriation from Germany 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

8. 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. 9 F. Direct expatriation within the EU/EEA (1) LuxembourgGermany Allianz SE Board/Vorstand 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

10. 10 F. Direct expatriation within the EU/EEA (2) LuxembourgGermany Allianz SE Board/Vorstand 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

11. 11 F. Indirect expatriation within the EU/EEA (1) Before After Shareholders 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 Deutsche Bank AG, Germany Neue Deutsche Bank SA, Luxembourg Deutsche Bank AG, Germany

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

13. 13 G. Direct expatriation outside the EU/EEA USAGermany XYZ Inc. Board 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

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

15. 15 BONN Johanna-Kinkel-Straße 2 - 4 53175 Bonn telephone: ++49(0) 2 28 / 95 94 - 0 telefax:++49 (0) 2 28 / 95 94 - 100 E-Mail: bonn@fgs.de BERLIN Friedrichstraße 69 10117 Berlin telephone:++49(0) 30 / 21 00 20 - 20 telefax:++49(0) 30 / 21 00 20 - 99 E-Mail: berlin@fgs.de FRANKFURT AM MAIN Platz der Einheit 1 60327 Frankfurt/Main telephone:++49(0) 69 / 71 703 - 0 telefax:++49(0) 69 / 71 703 - 100 E-Mail: frankfurt@fgs.de Contact: Dr. Klaus Sieker E-Mail: klaus.sieker@fgs.de MÜNCHEN Brienner Straße 29 80333 München telephone:++49(0) 89 / 80 00 16 - 0 telefax:++49(0) 89 / 80 00 16 - 99 E-Mail: muenchen@fgs.de