1 Speaker Name: André Marius Le Prince Company:WLP GmbH, Hamburg, Germany WIRA AG, Munich, Stuttgart, Düsseldorf, Nurnberg, Hamburg, Germany Phone:

2 Initial Case German Holding/Company is doing business in a foreign country Legal form of the German Holding/Company: partnership (“GmbH & Co. KG”) or corporation (“GmbH”) Legal form of the operating company abroad: partnership (transparent) or corporation (intransparent) German Holding/Company has no other permanent establishments abroad The ultimate business owner of the German Holding/Company is a private person in Germany Profit before tax: € 100 Mio., each: partnership and corporation

3 Initial Case Corporate Income Tax rate abroad: 25% Income Tax rate abroad:40% Withholding Tax (“WHT”) on dividends limited by Double Tax Treaty (“DTT”): 5% in case of a participation exemption (EU- states: 0%) and 15% in other cases Corporate Income Tax in Germany:15.825% Trade Tax in Germany:14% Income Tax Rate in Germany: 47.48% Tax rate low tax country:10 % (shall also apply for WHT)

4 Options Option 1Option 2 Germany foreign country GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio. 100 % limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent)

5 Tax consequences option 1 1. Subject to foreign Taxes: Corporate Income Tax (“CIT”): GmbH as non-resident company Corporation as resident company 2. Subject to German Taxes: a) Corporate Income Tax:GmbH b) Trade Tax (“TT”):GmbH c) Income Tax (“IT”):Individual 3. Taxable profit that is subject to Tax: a) Corporation:€ 100,000,000 b) GmbH:€ 100,000,000 (profit from the transparent limited partnership) c) GmbH: Dividends from the corporation d) Individual:Dividends from GmbH GmbH limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio.

6 Tax consequences option 1 4. Tax Calculation abroad 5. Tax Calculation in Germany Profit of / Subject to Tax Limited partnership CorporationTax RateTax burden Corporation----€100 Mio.CIT: 25%€ 25 Mio. GmbH€ 100 Mio.CIT: 25%€ 25 Mio. GmbH€ 75 Mio.WHT: 5%€ 3.75 Mio. Profit of / Subject to Tax Limited partnership CorporationGmbHTax RateTax burden GmbH € 100 Mio. (taxfree due to DTT) € 3.75 Mio. (= 5% of € 75 Mio.) CIT: % TT: 14% € 0.59 Mio. € 0.53 Mio. Individual€ 145,13 Mio.IT: %€ Mio.

7 Tax consequences option 2 1. Subject to foreign Taxes: Corporate Income Tax: Corporation as resident company Income Tax:Individual as non-resident 2. Subject to German Taxes: a) Trade Tax:GmbH & Co. KG b) Income Tax:Individual 3. Taxable profit that is subject to Tax: a) Corporation:€ 100,000,000 b) Individual:€ 100,000,000 (profit from the transparent limited partnership and GmbH & Co. KG) c) Individual: Dividends from the corporation (passed through the transparent GmbH & Co. KG) limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio. GmbH & Co. KG (transparent)

8 Tax consequences option 2 4. Tax Calculation abroad 5. Tax Calculation in Germany Profit of / Subject to Tax Limited partnership CorporationTax RateTax burden Corporation----€100 Mio.CIT: 25%€ 25 Mio. Individual€ 100 Mio.IT: 40%€ 40 Mio. Individual€ 75 Mio.WHT: 15%€ Mio. Profit of / Subject to Tax Limited partnership CorporationGmbH & Co. KG Tax RateTax burden GmbH & Co. KG € 100 Mio. (taxfree due to DTT) € 45 Mio. (= 60% of € 75 Mio., but taxfree due to TT Act) TT: 14%€ 0 Mio. Individual € 45 Mio. (= 60% of € 75 Mio.) IT: 47.48%€ Mio. Individual € 100 Mio. (taxfree due to DTT) IT: 47.48%€ 0 Mio.

9 Summary initial case Taxes* / Options Corporate Income Tax WHTTrade Tax Income Tax Total% Option 1 (German corporation) Mio.3.75 Mio.0.53 Mio Mio Mio % Option 2 (German partnership) 25 Mio. 0 Mio. (credit system) 0 Mio Mio Mio % * = German and foreign taxes

10 Optimisation of the tax structure by establishing a fiscal unity in Germany Germany foreign country fiscal unity: basic model GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent)

11 Tax consequences of the fiscal unity (basic model) 1. Subject to foreign Taxes: Corporate Income Tax: GmbH as non-resident company Corporation as resident company 2. Subject to German Taxes: a) Corporate Income Tax: b) Trade Tax:GmbH & Co. KG c) Income Tax:Individual 3. Taxable profit that is subject to Tax: a) Corporation:€ 100,000,000 b) GmbH (as non-resident)€ 100,000,000 from the transparent limited partnership and dividends from the corporation c) GmbH & Co. KG:€ 100,000,000 (profit from the transparent limited partnership and dividends from corporation only for TT purposes) d) Individual:Dividends from corporation and profit from the transparent limited partnership GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent)

12 Tax consequences of the fiscal unity (basic model) 4. Tax Calculation abroad 5. Tax Calculation in Germany Profit of / Subject to Tax Limited Partnership CorporationTax RateTax burden Corporation----€100 Mio.CIT: 25%€ 25 Mio. GmbH€ 100 Mio.CIT: 25%€ 25 Mio. GmbH€ 75 Mio.WHT: 5%€ 3.75 Mio. Profit of / Subject to Tax Limited Partnership CorporationGmbH / GmbH & Co. KG Tax RateTax burden GmbH Allocation to the transparent GmbH & Co. KG CIT: % TT: 14% € 0 Mio. GmbH & Co. KG € 100 (taxfree due to DTT) € 45 Mio. (= 60% of € 75 Mio., but taxfree due to TT Act) TT: 14 %€ 0 Mio. Individual € 45 Mio. (= 60% of € 75 Mio.) € 100 Mio. (taxfree due to DTT) IT: 47.48%€ Mio.

13 Summary fiscal unity (basic model) Corporate Income Tax WHTTrade TaxIncome Tax Total% 50 Mio.3.75 Mio.0 Mio Mio Mio.37.56% Profits of the limited partnership are tax free in Germany due to Art. 7 and Art. 23 Double Tax Treaty (“DTT”) Profits of the limited partnership are allocated to the transparent GmbH & Co. KG, so that the tax exemption will apply at the level of the individual Withholding Tax on dividends of the corporation is limited to 5 % due to DTT Dividends of the corporation are allocated to the transparent GmbH & Co. KG, so that only 60% of the dividends are subject to Income Tax Anti-abuse rules have to be kept in mind (business function is required)

14 Optimisation of the tax structure by establishing a fiscal unity in Germany Germany EU, e.g. Austria fiscal unity: advanced model 1 GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. EU-corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent)

15 Tax consequences of the fiscal unity (advanced model 1) 1. Subject to EU-Taxes: Corporate Income Tax: GmbH as non-resident company EU-corporation as resident company 2. Subject to German Taxes: a) Corporate Income Tax: b) Trade Tax:GmbH & Co. KG c) Income Tax:Individual 3. Taxable profit that is subject to Tax: a) EU-Corporation:€ 100,000,000 b) GmbH (as non-resident):€ 100,000,000 from the transparent limited partnership and dividends from the EU-corporation b) GmbH & Co. KG:€ 100,000,000 (profit from the transparent limited partnership) c) Individual:Dividends from corporation (passed through the transparent limited partnership) and profit from the transparent limited partnership GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. EU- corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent)

16 Tax consequences of the fiscal unity (advanced model 1) 4. Tax Calculation abroad 5. Tax Calculation in Germany Profit of / Subject to Tax Limited Partnership EU-CorporationTax RateTax burden EU-Corporation----€100 Mio.CIT: 25%€ 25 Mio. GmbH€ 100 Mio.CIT: 25%€ 25 Mio. GmbH€ 75 Mio.WHT: 0%€ 0 Mio. Profit of / Subject to Tax Limited Partnership EU-CorporationGmbH / GmbH & Co. KG Tax RateTax burden GmbHAllocation to the transparent GmbH & Co. KG CIT: % TT: 14% € 0 Mio. GmbH & Co. KG € 100 (taxfree due to DTT) € 75 Mio. (taxfree due to DTT) TT: 14 %€ 0 Mio. Individual€ 75 Mio. (taxfree due to DTT) € 100 Mio. (taxfree due to DTT) IT: 47.48%€ 0 Mio.

17 Summary fiscal unity (advanced model 1) Corporate Income Tax WHTTrade TaxIncome Tax Total% 50 Mio.0 Mio. 50 Mio.25% Profits of the limited partnership are taxfree in Germany due to Art. 7 and Art. 23 Double Tax Treaty (“DTT”) Profits of the limited partnership are allocated to the transparent GmbH & Co. KG, so that the tax exemption will apply at the level of the individual No Withholding Tax on dividends of the EU-corporation Dividends of the EU-corporation are allocated to 1) the transparent limited partnership and consequently 2) to the transparent GmbH & Co. KG, so that Art. 10, Art. 7 and Art. 23 DTT are applying, provided that the EU-corporation is part of the business property of the limited partnership (see above) Anti-abuse rules have to be kept in mind  each individual case has to be regarded in detail (business function is required); close cooperation between tax advisors of each country is essentially

18 Comparison basic model vs. advanced model 1 Germany foreign country fiscal unity: basic model GmbH 100 % limited partnership (transparent) Profit: € 200 Mio. corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent) GmbH 100 % limited partnership (transparent) Profit: € 100 Mio. EU-corporation Profit: € 100 Mio. 100 % GmbH & Co. KG (transparent) Tax burden: 25% fiscal unity: advanced model 1

19 Optimisation of the tax structure by establishing a fiscal unity in Germany Germany EU, e.g. Austria or Netherlands ( + tax ruling) fiscal unity: advanced model 2 Low tax country GmbH 100 % limited partnership (transparent) Profit: € 25 Mio. EU-corporation Profit: € 25 Mio. 100 % GmbH & Co. KG (transparent) corporation Profit: € 150 Mio.

20 Tax consequences of the fiscal unity (advanced model 2) 1. Subject to Taxes in low tax country: Corporate Income Tax: EU-corporation as non-resident company corporation as resident company 2. Subject to EU-Taxes: Corporate Income Tax: GmbH as non-resident company EU-corporation as resident company 3. Subject to German Taxes: a) Corporate Income Tax: b) Trade Tax:GmbH & Co. KG c) Income Tax:Individual 4. Taxable profit that is subject to Tax: a) Corporation:€ 150,000,000 b) EU-corporation:€ 25,000,000 and dividends from corporation c) GmbH (as non-resident)€ 25,000,000 from the transparent limited partnership and dividends from the EU-corporation b) GmbH & CO. KG:€ 25,000,000 (profit from the transparent limited partnership and dividends from EU-corporation only for TT purposes) c) Individual:Dividends from EU-corporation and profit from the transparent limited partnership GmbH 100 % limited partnership (transparent) Profit: € 25 Mio. EU-corporation Profit: € 25 Mio. 100 % GmbH & Co. KG (transparent) corporation Profit: € 150 Mio.

21 Tax consequences of the fiscal unity (advanced model 2) 5. Tax Calculation abroad 6. Tax Calculation in Germany  See fiscal unity advanced model 1: due to interaction between the German fiscal unity and the DTT the German tax burden amounts to € 0.0 Profit of / Subject to Tax Limited Partnership CorporationEU- corporation Tax RateTax burden Corporation€150 Mio.CIT: 10%€ 15 Mio. EU- Corporation € 135 Mio. € 25 Mio. WHT: 10 % CIT: 25% € 13.5 Mio. € 6.25 Mio. GmbH€ 25 Mio.CIT: 25 %€ 6.25 Mio. GmbH€ Mio.WHT: 0%€ 0 Mio.

22 Summary fiscal unity (advanced model 2) Corporate Income Tax WHTTrade TaxIncome Tax Total% 27.5 Mio.13.5 Mio.0 Mio. 41 Mio.20.5% Profits of the limited partnership are taxfree in Germany due to Art. 7 and Art. 23 Double Tax Treaty (“DTT”) Profits of the limited partnership are allocated to the transparent GmbH & Co. KG, so that the tax exemption will applying at the level of the individual No Withholding Tax on dividends of the EU-corporation Dividends of the EU-corporation are allocated to 1) the transparent limited partnership and consequently 2) to the transparent GmbH & Co. KG, so that Art. 10, Art. 7 and Art. 23 DTT are applying, provided that the shares in the EU- corporation are allocated to the business property of the limited partnership (see above) Anti-abuse rules have to be kept in mind  each individual case has to be regarded in detail (business function is required); close cooperation between tax advisors of each country is essentially

23 Options for foreign investors Fiscal unity model shall exemplify the possibilities of reduction of tax burden by using tax systems of several countries (e.g. Germany, Austria or Netherlands) Fiscal unity model in connection with income from abroad can be applied on non-resident investors in Germany provided that the German GmbH & Co. KG is qualified as a permanent establishment of non-resident investors and exemption method in terms of the DTT shall apply Utilisation of interaction / combination between national provisions and the provisions of the respective DTT requires close cooperation between tax advisors of each participated country Risks: Subject-to-tax clauses and anti-abuse rules of the participants countries; each individual case has to be regarded in detail

24 Options for foreign investors Germany EU, e.g. Austria or Netherlands ( + tax ruling) Low tax country GmbH 100 % limited partnership (transparent) Profit: € 25 Mio. EU-corporation Profit: € 25 Mio. 100 % GmbH & Co. KG (transparent) corporation Profit: € 150 Mio. Investors country DTT + exemption method for business profits

25 Options for foreign investors Overview of DTT as example where exemption method shall apply on profits of the German permanent establishment (Art. 7, Art. 10 para 4, Art. 21 and Art. 23 DTT) AustriaCroatiaLiberiaPoland BelgiumEgyptLuxembourgSerbia BoliviaFranceMoroccoSwitzerland BulgariaHungaryMauritiusSri Lanka Côte d´IvoirIceland NorwayVenezuela

26 THANK YOU FOR YOUR ATTENTION André Marius Le PrinceJohann MissalWLP GmbH, Hamburg, Germany