A cross-border transfer occurs when two of the three connecting points are located in different countries. Also in the case of cross-border submissions, the control untaking should be prevented as far as possible, whereby a tax-neutral submission should be effected. How cross-border submissions are therefore presented, which variations can occur and which criteria must be met, we explain in this introductory article.

In the case of purely national transfer operations, tax easing is excluded. Only a cross-border entry can trigger a de-entanglement. Cross-border contributions are characterised by the fact that at least two of the three tax connecting points (transferring, receiving corporation and transferred assets) are located in different countries. This results in a total of six scenarios:

SEGMENT002 1.1. The 6 scenarios of cross-border contribution

Domestic assets can therefore (1) be transferred by a national to a foreign corporation, (2) by a foreigner to a foreign corporation or (3) by a foreigner to a domestic corporation.

Foreign assets may be transferred (4) by a national to a foreign corporation, (5) by a national to a domestic corporation or (6) by a foreigner to a domestic corporation.

2nd principles of international activity of companies

In principle, the entrepreneurial activity is attributed to the parent company, unless the company carries out its activity in a permanent establishment located in another state. In the following sections, the criteria for the existence of a permanent establishment must be met (the permanent establishment) and how the taxation powers on the capital gains of an asset are to be divided between the parent company and the permanent establishment (distribution of capital gains under Article 13 OECD-MA). The following description describes the conditions under which the Federal Republic of Germany is entitled to a taxation right (the extent of the German taxation right on domestic and foreign business assets) and how this taxation right is excluded or limited by DTA requirements (legal tax deregulation in the light of the amended understanding of the agreement by the BFH); Actual tax easing for cross-border conversions in the light of the changed understanding of the agreement by the BFH.