1. Federal Court of Justice rules on assignment clause in T&Cs for car financing
In April 2023, the German Federal Court of Justice (Bundesgerichtshof, “BGH”) ruled that an assignment clause used by a German captive bank in its terms and conditions with consumers pursuant to which the consumer assigned i.a. all claims against the vehicle manufacturer in connection with the purchase of the vehicle (with the exception of warranty claims under the purchase agreement) to the lender by way of security was invalid.
The borrower, a consumer, had sued the vehicle manufacturer in connection with the so-called diesel engine scandal. In its defense, the manufacturer argued that the consumer no longer had any claims against the manufacturer because they were covered by the assignment under the vehicle financing agreement.
The BGH then ruled in April that the assignment clause was invalid because it also covered the consumer’s claims against the lender in the event of a withdrawal from the loan agreement and the vehicle purchase agreement which the court found to be in conflict with German civil law principles.
In its new ruling of 3 July 2023, the BGH has now decided that the assignment clause is also invalid in B2B contracts because also towards business clients, it covers claims that cannot be assigned under sec. 400 German Civil Code (Bürgerliches Gesetzbuch).
Click here for further details (available only in German).
Relevant for: Finance providers.
2. Court finds price adjustment clause in terms and conditions of streaming provider to be invalid
In a judgment handed down on 25 May 2023, the Regional Court of Munich (Landgericht München) found several clauses used by a streaming provider in its general terms and conditions to be invalid, including provisions intended to enable the streaming provider to adjust pricing and content it offered to its customers.
The court found that the clauses were unreasonably disadvantageous to consumers and in conflict with German civil law. In its ruling, the court cited, among other things, a long-standing principle of German courts that provisions allowing a company to increase prices based on certain factors must also include a right for the consumer to demand a price decrease if costs go down. The latter was missing from the terms and conditions.
The judgment is not yet legally binding. Following an appeal by the streaming provider, the Higher Regional Court of Munich will rule on the matter (Oberlandesgericht München).
Click here for further details (available only in German).
Relevant for: Subscription providers, mobility providers and all companies using similar provisions in their general terms and conditions
3. Telecommunications provider’s dunning fees to be found unlawfully high; excess fees collected from customers must be repaid
After the German Consumer Protection Association (Deutscher Verbraucherschutzverein e.V.) had sued before the Regional Court of Düsseldorf (Landgericht Düsseldorf), a telecommunications provider’s dunning fees and fees for failed direct debits set out in its general terms and conditions were found to be excessively high.
Since they were structured as a lump-sum damage claim, the amount charged to the consumer may not exceed the damage that can be expected under normal circumstances under German civil law. In addition to the T&C provisions being found to be invalid, the provider must pay around EUR 50 million to the German state to return the unlawful profit from the use of the invalid provisions.
Click here for further details (available only in German).
Relevant for: Subscription and mobility providers
4. Tax legislation – two draft bills published in July 2023
The German Federal Ministry of Finance in July 2023 has published bills on two legislative projects that will if enacted, have a substantial impact on, inter alia, corporate income taxation. Whilst the Wachstumschancengesetz is introduced against a domestic background, comprising multiple individual changes to the existing taxation environment, the Mindestbesteuerungsrichtlinie-Umsetzungsgesetz aims to implement Council Directive (EU) 2022/2523 dated 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU into German domestic tax law (“Pillar 2” implementation).
- WachstumschancengesetzThe draft bill comprises a multitude of selective changes to tax law, aiming to improve the overall tax environment to foster growth, improve the liquidity situation of taxpayers and to stimulate investment and innovation in new technologies. The draft bill contemplates, inter alia, the following changes (only selected items from the draft bill):
- Interest barrier rule (Zinsschranke): Stand-alone escape and the equity-ratio escape to be abolished; compensation by transforming the EUR 3 million escape from an exemption limit (Freigrenze) into a general allowance amount (Freibetrag).
- Introduction of a new interest rate cap (Zinshöhenschranke): Interest expenses stemming from a business relationship between related parties (e.g. shareholder loans) shall generally not be deductible if based on an interest rate that is higher than a defined maximum rate (reference to sec. 247 German Civil Code plus 2% margin). If the taxpayer demonstrates that funds could only have been obtained by both the lender and the ultimate parent company at a higher rate, then in principle such higher rate shall be relevant. The interest rate cap shall not apply if the lender pursues a significant economic activity in the state (which must not be a tax haven) in which it has its registered office or management.
- Loss carry-forwards (Verlustvortrag): Effective impact of loss carry-forwards is currently limited due to a 60% minimum taxation threshold (Mindestbesteuerung). For the tax years 2024 to 2027, this minimum taxation threshold shall not apply. As of tax year 2028, the minimum taxation threshold shall be re-introduced, reflecting however, an increased base amount of EUR 10 million before the limitation kicks in. Additional changes are envisaged for tax loss carry-backs (Verlustrücktrag).
- Obligation to notify also domestic tax arrangements (innerstaatliche Steuergestaltungen): Furthering the already existing notification obligation for cross-border tax arrangements (DAC6), there shall be an obligation to notify also certain domestic tax arrangements as of tax year 2025.
- Mindestbesteuerungsrichtlinie-Umsetzungsgesetz
The new law aims to ensure that the consolidated income of all business units of a corporate group are effectively taxed at a minimum rate of 15% (anti tax-dumping). If such effective minimum tax rate does not arise on the basis of regular income taxation of the corporate group, additional taxation shall be imposed by the new rules until an effective 15% tax rate is reached. Only companies exceeding an annual turn-over threshold of €750 million or more shall be affected by the minimum tax rules. This turnover-related threshold is equal to threshold used as the basis for country-by-country reporting (CbCR). Both international and purely domestic groups of companies will be affected by the rules, irrespective of their legal form. According to the draft bill, new minimum tax regulations shall generally come into force for fiscal years beginning after December 30, 2023.
If minimum tax regulations are applicable, a twofold tax declaration obligation arises: Taxpayers will have to submit a minimum tax report to the German Federal Central Tax Office (BZSt), comprising a structured, detailed overview of the group structure in the individual tax jurisdictions as well as numerous details for the tax calculation and, in addition, a minimum tax return must be submitted to the local tax office. Submission is in principle to be ensured by the ultimate parent of the corporate group, if located in Germany. Alternatively, the corporate group, or the tax authorities, may designate a domestic entity to assume the obligations.
In addition to the minimum tax regulations, the draft bill also contemplates further significant changes: In the area of income tax, the license barrier (Lizenzschranke) is to be abolished; in the area of CFC taxation, the low tax threshold (Niedrigbesteuerungs-Grenze) is to be lowered to 15% and liability of CFC add-on amounts (Hinzurechnungsbeträge) to trade tax shall be abolished.
Further details (available only in German):
Relevant for: General relevance for all entities subject to unlimited or limited tax liability in Germany
5. German government increases funding for electric vehicle subsidies
According to media reports, Germany’s Federal Ministry for Economic Affairs and Climate Action has decided to increase funding for electric vehicle (“EV”) subsidies by at least EUR 400 million for 2023. This is critical as funding for EV subsidies is capped at the amount of allocated funding, previously at EUR 2.1 billion for 2023. As of 3 July 2023, EUR 1.72 billion of that budget had already been paid out this year. With the additional cash injection, funding is expected to be sufficient for the remainder of the year.
Under the current EV subsidy program, between EUR 3,000 and EUR 4,500 is paid per EV, depending on the list price. From September on, EV subsidies will only be available to consumers, no longer to companies.
Click here for further details (available only in German).
Relevant for: Manufacturers, subscription and mobility providers
6. Rules for greenhouse gas reduction quota amended
On 28 July 2023, changes to the Greenhouse Gas Reduction (“GHG”) Quota rules were published. Under the GHG quota trading scheme, owners of electric vehicles (“EVs”) can sell a fixed rate amount of electricity deemed to have been generated by their electric vehicle. The proceeds from such sales can be around EUR 200 to EUR 325 per year, providing an important incentive to own EVs.
Part of the amendment to the GHG rules is a change in the deadline for applications to receive GHG payments. Previously, even if an EV was registered in December, the owner could receive GHG payments for the entire calendar year and could submit an application by 28 February of the following year. Now, applications can only be submitted by 15 November for the same calendar year. As a result, EVs registered after 15 November will not be eligible for any GHG payments in the same year.
Among other things, the new rules also tighten the eligibility criteria for vehicles for which GHG quota payments can be received. Previously, even electric scooters with a maximum speed of up to 45 km/h were eligible under certain circumstances. Now, GHG quota payments will be limited to vehicles that require registration, excluding electric scooters.
Click here for further details (available only in German).
7. The long-awaited EU Machinery Regulation No. 2023/1230 was published in the Official Journal of the EU on 29 June 2023
The EU Machinery Regulation will replace the current Machinery Directive (Directive 2006/42/EC). It was now published in the Official Journal of the EU on 29 June 2023.
The new regulation contains numerous changes regarding the safety of machinery that manufacturers must comply with. Legal certainty is increased by defining binding requirements for the design, construction and putting into service of machinery and related products. The regulation will also require manufacturers to implement certain protection against interference with machinery, e.g. when the machinery offers remote access.
The new regulation will start to be applied on 20 January 2027. Click here for further details.
Relevant for: Manufacturers
8. Draft for Amendment of German Road Traffic Registration Regulation released
The German Federal Ministry for Digital and Transport (Bundesministerium für Digitales und Verkehr) presented a draft amendment to the German Road Traffic Registration Regulation (Straßenverkehrs-Zulassungs-Ordnung, “StVZO”), an ordinance (Rechtsverordnung) that regulates the formal and technical requirements for the registration of vehicles for the use on public roads.
The draft includes a comprehensive revision of the StVZO in order to improve its structure and readability for citizens. It also implements changes required by EU law.
Click here for further details (available only in German).
Relevant for: Manufacturers, subscription and mobility providers
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