Tax Deductibility of License Fee Payments under German Tax Law – The License Barrier Rule Pursuant to Sec. 4j of the German Income Tax Act

X GmbH, resident in country A and benefiting from low and preferential tax treatment within the meaning of Sec 4j ITA, licenses intangible assets to Y GmbH, resident in country B and is taxed at a high rate according to Sec. 4j(2) ITA. Y GmbH licenses these intangible assets via a sub-licensing agreement to Z GmbH, which is resident in Germany. The contract provides…

This rule also applies, by analogy, to multi-layer structures if the above example…