Relocation of production abroad

If relocating production abroad is considered for business reasons, there are a number of legal and tax issues that need to be clarified. You should know German foreign tax law very well in order not to get into a tax fiasco.

The new regulations of the AStG are partly applied by the tax offices retroactively back to 2007. The reason for this is that the regulations are not new, but are only of a clarifying nature. With our expertise as specialist advisors for international tax law, we have the issue under control. The same applies to commercial, corporate and tax law in China and other countries.

If the function is relocated, then future profits will also be generated abroad and are therefore exempt from German taxation. The German tax authorities therefore consider whether the transferred production or function represents a partial company value. In an extremely complex and therefore dangerous process, an assessment is carried out which results in a positive value even if production in Germany has previously led to losses and Germany therefore receives more taxes anyway without the loss-making function.

In case of doubt, this leads to the destruction of capital, because you cannot write off any of the calculated value abroad despite taxation in Germany. If you plan to relocate production abroad or relocate individual functions, you should definitely seek expert advice beforehand. The tax consequences can also be avoided through proper design.