Germany: 2016 German Law Changes And Administrative Outlook Part 1

Various changes in German law scheduled for 2016 will affect your company's legal, accounting, administrative obligations, and how your business operates.

German law saw various changes in 2015, and this will continue over the next 12 months. Some of these changes will result in fewer legal, accounting and administrative obligations while others will increase the responsibility for businesses.

Changes affecting corporate secretarial, administrative and accounting requirements

New Act to facilitate the administrative and accounting burden for SMEs and start ups

The so-called "Bürokratieentlastungsgesetz" (BüroKrEntlG) was implemented on 1 January 2016. It affects small and medium-sized companies (SMEs) in Germany, including start-ups, pursuant to its new definition and understanding based upon the new Act.

A company is now qualified as a SME if its annual profit does not exceed €60,000 (previously, €50,000) and if annual turnover amounts to less than €600,000 (previously, €500,000). The BüroKrEntlG exempts SMEs and start-ups from certain accounting and reporting requirements and reduces the storage or archiving rules.

This means that qualified SMEs are exempt from ongoing requirements and interim reporting. Preliminary VAT returns, annual tax returns and statutory financial statements still need to be prepared within the legal time frames; however, less information is required. Archive rules have been relaxed, and SMEs are only required to archive mandatory (not all) information for up to 10 years.

Start-up companies will benefit from the new rules. Aside from accounting facilitations, start-ups will be exempt from providing information on certain statistics/the economic environment in the first year. Statistical information must be provided in years two and three only where annual turnover exceeds €800,000. From year four, all formal statistic requests from the authorities must be followed.

To verify whether a company qualifies as an SME pursuant to the BüroKrEntlG, a special SME test will be implemented, and details are still pending.

Payment processes/bank accounts

It has been mandatory for companies to use an IBAN for any and all payments since 2014. Private persons will now have to follow this rule, as payments without a valid IBAN will not be executed. Since 1 February 2016, a BIC code is no longer been required for any payments within the European Economic Region (EU, Island, Liechtenstein and Norway).

As per the EU Payment Account Directive (EU-Zahlungskonten-Richtline), banks are requested to open bank accounts for everyone who is legally accepted in Germany, independent from whether he/she has a permanent residence in the country or not. The implementation of this directive will be transformed into German law by 16 September 2016 at the latest.

Safe Harbour and data protection in Germany/EU

For about 15 years, Safe Harbour rules allowed companies in the EU including Germany, to transfer personal and sensitive data to the US, despite the US not having a data protection law comparable to Europe.

The European Commission decided in 2000 that US companies bind themselves to seven rules on how to treat sensitive data in the US. Based upon a lawsuit of an Austrian citizen against Facebook (Facebook transfers personal data of European citizens to the US) the European Court of Justice (EuGH) decided in October 2015 that Safe Harbour rules did not provide sufficient security in relation to the usage of the transferred personal data from EU citizens in the US, and accordingly stated that Safe Harbour rules did not comply with EU data protection law.

On 2 February 2016 the European Commission and the United States agreed on a potential solution for transatlantic data flows: the EU-US Privacy Shield. How the outcome of negotiations will be embedded in a framework agreement which needs to be confirmed and carefully reviewed by the representatives of each member state, as well as by the European parliament, remains to be seen and will determine what exact consequences the entities may face. Read the EU Commission press release here. As the aforementioned will have an effect on each data transfer to the US, it needs to be monitored on a regular basis.

Compliance

With significant intensification and tightening of sanction regimes, the EU published the Fourth Directive on money laundering, and the new money transfer regulation against money laundering on 5 June 2015, with effect from 25 June 2015.

The directive demonstrates the determination of the European legislator to step up against money laundering and terrorist financing. Member states have two years to transpose the new provisions of the directive into national law.

The objective is to ensure for greater transparency on risk-sensitivity, especially with business and financial transactions. Article 30 of the new directive establishes stricter fulfilment of customer cooperation duties. Thus, the obliged persons and responsible entities falling under the German money laundering regulations have the duty to comply with customer due diligence. In particular, they are obliged to obtain accurate information in regard to identification of the contracting party, ultimate beneficial owner, background of the business and financial transactions, and to monitor and control these processes on a regular basis. These measures make it possible to trace money flows and to detect unusual or even suspicious transactions. Where something suspicious is detected, there is an customer obligation to inform the authorities, and information will be kept in a central register in each member state. The register will not be publicly available, and only accessible by the authority or other persons/organisations that can demonstrate their legitimate interest. Where the register is going to be established in Germany is still to be determined.

The Fourth Version of the Money Laundering Directive regulates cross-border cases. Obliged subsidiaries/branches must comply with the local money laundering rules in the host country. In order to fulfil requirements, obliged entities/branches may consider bringing in specialised, experienced providers to help propose adequate customer due diligence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.