Ecovis Malta

StaRUG: Act on the Stabilisation and Restructuring Framework for Businesses

The new German Act on the Further Development of Restructuring and Insolvency Law, or SanInsFoG, was passed in 2020. SanInsFoG changes insolvency law and introduces the new Act on the Stabilisation and Restructuring Framework for Businesses (StaRUG), which came into force on 1 January 2021.

StaRUG – The New German Restructuring Tool

The StaRUG is a pre-insolvency rescue procedure which allows a debtor to implement a restructuring plan outside formal insolvency proceedings.

General Features of StaRUG

• Rescue procedure in which a restructuring plan is put to a vote across separate classes of creditors.
• Available at an early stage outside of formal insolvency proceedings.
• Initiation requires the debtor’s notice to the court, combined with a restructuring concept and confirmation that the company is facing impending insolvency.
• Moratorium of maximum eight months possible.
• Dept-equity-swaps and other measures are possible in the plan.

High Degree of Flexibility

• Debtor may choose from a broad toolkit of individual instruments.
• Not all instruments require the court’s involvement.
• Debtor is free to choose who is included in the plan.

The restructuring process closes the gap between free restructuring and judicial insolvency proceedings. However, the method can only be used by companies that are threatened with insolvency, explain the Ecovis experts.

Is your company in crisis? We can support you in choosing the right restructuring instruments.

Nils Krause, Partner, Lawyer, ECOVIS Insolvenz und Sanierungs AG, Hamburg, Germany

Changes to the Insolvency Law

• Liability regimes for wrongful trading, which were scattered throughout corporate law, are harmonised in one central insolvency law provision (Par. 15b InsO).
• Debtors who wish to use insolvency in self-administration (“Insolvenz in Eigenverwaltung”) need to show to the satisfaction of the court that they have provided detailed debtor in possession planning with a six-month planning horizon.
• The mandatory insolvency case of over-indebtedness was reduced to a twelve-month (instead of 24 month) forward-looking going-concern prognosis.

For further information please contact:

Michael Busching, Partner, Lawyer, ECOVIS Insolvenz und Sanierungs AG, Hamburg, Germany
Email: michael.busching@ecovis.com

Nils Krause, Partner, Lawyer, ECOVIS Insolvenz und Sanierungs AG,
Hamburg, Germany
Email: nils.krause@ecovis.com

Tax Relief for Family Offices in Greece

Greece introduced a new business tool for the management of cash flow and family property assets in February 2021. It is regulated in the “family offices” law.

Family Offices in Greece

The new beneficial tax regime of the “family offices” law, Article 25 of Law L4778/2021, provides for the incorporation of a special purpose vehicle either through family members and/or other legal entities in which family members participate. It will be available only for individuals who have their tax residence in Greece.

For the implementation of a family office in Greece, the following requirements must be met:

• The family office must employ at least 5 people within a period of 12 months from its incorporation.
• The family office must spend at least EUR 1,000,000 in operating expenses annually, while its taxable profits will be determined on a cost-plus basis by applying a specific markup of 7% to its total expenses.

Our experienced team can support you in setting up a family office in Greece, as well as in all legal and tax aspects of real estate transactions.

Dimitrios Leventakis, Managing Director, ECOVIS HELLAS L.T.D., Athens, Greece

The regime’s tax features provide certainty for the corporate tax base, since any expense which is properly recorded under Greek accounting regulations is treated as tax deductible. At the same time, offices covered by the regime do not have to prepare transfer pricing documentation for their intra group transactions, explain the Ecovis experts.

Furthermore, family offices are not obliged to be registered with the commercial registry and to publish annual financial statements. Any transactions between the family office and the family members will also be out of the scope of VAT.

Digital Building Identification

A new electronic Digital Building Identification came into effect on 1 February 2021. The ID was introduced under Law 4495/2017 and further specified under Laws 4693/2019 and 4759/2020. It is mandatory for all buildings old and new, public and private. The ID will be required when buying or selling a property, issuing any building permit, and gaining an exemption from annual fines for additional constructions that took place before 2011 and have not been included in building permits.

For further information please contact:

Dimitrios Leventakis, Managing Director, ECOVIS HELLAS L.T.D., Athens, Greece
Email: dimitrios.leventakis@ecovis.gr

Anastasia Moschovaki, Tax Lawyer, ECOVIS HELLAS L.T.D., Athens, Greece
Email: moschovaki.anastasia@ecovis.gr

GILTI High Tax Election in the United States

Net income earned by a Controlled Foreign Corporation (“CFC”) may be subject to immediate US taxation to US shareholders, whether or not distributed. This results from the Global International Low Tax Income (GILTI) provisions of the US Tax Cuts & Jobs Act of 2017.

The effective tax rate on this income, governed by GILTI, is 10.5% for C corporations and as high as 37% for individuals. After 2025, the rate for C corporations increases to 13.125%. There are two significant factors in determining whether US shareholders will be subject to tax on a CFC’s net income, explain the experts from Marcum LLP*. These factors are:

• The level of asset investment by the CFC in its own country. The GILTI provisions will tax, each year, the excess return of a CFC above 10% of foreign depreciable assets, known as the Qualified Business Asset Investment (QBAI).
• The effective foreign income tax rate on the CFC’s earnings.

When to Include GILTI Income in US Income

Once the GILTI amount is determined, the US shareholder will be required to include the allocable share of this amount in US taxable income. There is an exclusion available equal to 50% of the GILTI amount, and the other 50% is taxed to the US shareholder in accordance with applicable federal income tax rates. For a corporate shareholder, the GILTI income is taxed at 21%, after taking into consideration the exclusion, for an effective tax rate of 10.5%.

Foreign income taxes paid by the CFC can be taken as a tax credit against US tax on GILTI income, subject to an 80% reduction. As such, if the CFC’s effective foreign income tax rate (determined under US tax principles) is at least 13.125%, generally there should be no net US income tax due on a corporate US shareholder’s GILTI income, after application of exclusions and foreign tax credits. US individual shareholders with GILTI income can, by election, be entitled to the same exclusions and credits as a corporation.

Make Use of the Tax Election Annually

US tax regulations finalised in July 2020 provide for a GILTI High Tax Election. Under this election, a US shareholder of a CFC will not be required to include GILTI income on his/her/its US income tax return if the CFC’s effective tax rate, as determined under US income tax principles, exceeds 18.9%. Once this threshold is met, a US shareholder can elect to exclude a tested unit’s (defined below) income entirely in determining the GILTI amount.

The election may be made on an annual basis and applies, consistently, to all CFCs owned by the same domestic controlling US shareholder and to all of a CFC’s US shareholders. A controlling US shareholder will provide notification to non-controlling US shareholders if the election is made.

We can help navigate the GILTI rules for US shareholders of foreign entities.

Mark Chaves, CPA, Co-Leader International Tax Services Practice, Marcum LLP*, Miami, Florida, USA

It is important to note that the GILTI High Tax Election is made on a tested unit basis, say the Marcum LLP advisers. A single CFC may be comprised of numerous tested units, or may itself constitute a tested unit. A tested unit may be a CFC, a branch of a CFC in certain cases, or certain entities in which a CFC has an interest. Tested units that are resident in the same country are combined.

The GILTI High Tax Election may not be beneficial in all cases. Clients should be careful to properly analyse the pros and cons before making the election on their US income tax returns.

For further information please contact:

Mark Chaves, CPA, Co-Leader International Tax Services Practice, Marcum LLP*, Miami, Florida, USA
Email: mark.chaves@marcumllp.com

*Marcum LLP is the exclusive associated partner of ECOVIS International for accounting, tax and audit in the United States of America.