The Taxation of Passive Foreign Investment - Lessons from German Experience

By M. Ruf, Alfons J. Weichenrieder. Social Science Research Network, 2009

131 citations recorded by the source corpus.

English Abstract: The paper evaluates the working of German CFC rules that restrict the use of foreign subsidiaries located in low‐tax countries to shelter passive investment income from home taxation. While passive investments make up a significant fraction of German outbound FDI, we find that German CFC rules are quite effective in restricting investments in low‐tax jurisdictions. We find evidence that the German 2001 tax reform, which unilaterally introduced exemption of passive income in medium‐ and high‐tax countries, has led to some shifting of passive assets into countries for which the exemption was previously limited. French Abstract: Ce texte evalue l’impact des regles imposees aux succursales a l’etranger des societes allemandes – regles qui limitent l’usage de filiales etrangeres localisees dans des pays a fiscalite legere pour mettre les revenus d’investissement passif a l’abri de la fiscalite dans le pays d’origine. Ces investissements passifs constituent une fraction significative de l’investissement direct a l’etranger des Allemands, et on decouvre que les regles allemandes sont tres efficaces pour restreindre les investissements dans des economies a fiscalite legere. Les resultats montrent que la reforme fiscale allemande de 2001, qui a unilateralement introduit une exemption du revenu passif dans les pays a fiscalite medium or lourde, a entraine un deplacement des actifs passifs vers les pays pour lesquels l’exemption etait limitee auparavant.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/1de7bcae42a43cf3188fe2a5d0abce4ebad9d589

How researchers see this paper

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In Accounting

1. G. Wamser
2. Thiess Buettner
3. Dhammika Dharmapala
4. Michael Overesch
5. Alfons J. Weichenrieder

In Economics and Econometrics

1. G. Wamser
2. Thiess Buettner
3. Dhammika Dharmapala
4. Alfons J. Weichenrieder

In Political Science and International Relations

1. G. Wamser
2. Thiess Buettner

Citations in the corpus

• What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature (2014, unknown): “This may, at least in part, perhaps be due to German CFC rules that tax low-taxed foreign passive income (such as interest received in a tax haven) at 25% (see Ruf and Weichenrieder (2009)). important to understand the findings of the empirical literature on BEPS.”
• Do Transfer Pricing Laws Limit International Income Shifting? Evidence from European Multinationals (2013, unknown): “Similarly, Ruf and Weichenrieder (2012) report evidence that controlled foreign company regulations are effective in reducing the attractiveness of passive investments in low-tax jurisdictions.”
• INTERNAL DEBT AND MULTINATIONAL PROFIT SHIFTING: EMPIRICAL EVIDENCE FROM FIRM-LEVEL PANEL DATA (2013, background): “10 For a discussion of the German CFC rule see Ruf and Weichenrieder (2009), who provide evidence that the German CFC rule is effective in curbing profit shifting.”