92001E2875

WRITTEN QUESTION E-2875/01

by Elly Plooij-van Gorsel (ELDR) to the Commission

(22 October 2001)

Subject: New tax legislation in the Federal Republic of Germany

On 7 September 2001 the law to curb illegal activities in the construction sector entered into force in the Federal Republic of Germany. This law requires clients in the building sector to withhold 15 % of the gross contract sum from payments to the contractor and transfer it to the German tax authorities. The amount is intended as an advance payment in respect of any corporation tax, income tax and/or turnover tax payable in Germany.

However, the tax office in Kleve, which is responsible for implementing the legislation in the case of Dutch firms, has still not take any steps to ensure that the legislation can be implemented effectively. Not only are there are no implementing directives, but the Kleve office does not have the manpower or facilities to implement the regulations. It is unlikely that these problems can be resolved in the near future. Many Dutch exporting firms therefore face financial and administrative chaos.

1. Is the Commission aware of the situation?

2. Does the Commission share my view that the complex and unclear administrative obligations make it very difficult for Dutch firms to operate in Germany and are therefore distorting competition?

3. Does the Commission agree with me that unless clear implementing measures are forthcoming, enforcement of the legislation should be put on hold until the implementing directives are known?

Answer by Mr Bolkestein on behalf of the Commission

(21 December 2001)

1. The Commission is aware of the Law of 30 August 2001 (German Federal Government Gazette, Bundesgesetzblatt, Part I, p. 2267). At the Commission's request the new Law no longer treats domestic and foreign companies differently, in contrast to the earlier Law with similar objectives. The tax deduction is to be applied only to payments made after 31 December 2001 as set out in new Law's rewording of Section 48 of the Income Tax Law (Einkommensteuergesetz).

2. and 3. The Commission has received letters from foreign companies and is examining the facts they contain to see whether the actual application of this new Law leads to indirect discrimination against foreign companies. If necessary the Commission will take the necessary steps to eliminate measures that are incompatible with the EC Treaty.