Discontinuation of the DTA with the United Arab Emirates

The double taxation agreement between Germany and the United Arab Emirates expired on December 31, 2021 (Art. 30, para. 1, sentence 1 in connection with Art. 29, para. 2 DTA).The effects are far-reaching and affect, among others, UAE-based airlines. The avoidance of taxation outside the domicile or place of management of the airline, usually achieved by the double taxation treaties in Article 8, is no longer relevant. Thus German tax law applies, at least until a new double taxation treaty is ratified or an intergovernmental agreement is issued or (as in the relationship with Oman) a decree is issued at the administrative level for mutuality in accordance with § 49 (4) EStG (Income Tax Act).  In any case, it is advisable to keep expected tax assessments open, since the agreements or decrees are often issued with retroactive effect, and experience shows that this takes a long time (in the case of Oman, the retroactive period was nine years). 

Irrespective of the question of whether permanent establishments are maintained in Germany by the international airline concerned, taxation in Germany takes the form of limited tax liability for corporation and trade tax (§ 49 (1) no. 2 a) and b) EStG). However, the taxable income is not determined based on an financial accounting with the application of transfer prices, but on a flat-rate basis according to § 49 (3) EStG: An amount of 5% of the respective ticket charges is taken as the basis for taxation. There is no provision for a deduction of operating expenses or losses.

The tax rate for corporate income tax is 15% plus the solidarity surcharge of 5.5%. In total, therefore, 15.825%.The trade tax is based on the different assessment rates of the municipalities in which staff is employed.  In Frankfurt, for example, the rate is 16.1%.