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The taxation of passive foreign investment: lessons from German experience

Martin Ruf and Alfons Weichenrieder ()

Canadian Journal of Economics, 2012, vol. 45, issue 4, 1504-1528

Abstract: The paper evaluates the working of German CFC rules that restrict the use of foreign subsidiaries located in low-tax countries to shelter passive investment income from home taxation. While passive investments make up a significant fraction of German outbound FDI, we find that German CFC rules are quite effective in restricting investments in low-tax jurisdictions. We find evidence that the German 2001 tax reform, which unilaterally introduced exemption of passive income in medium- and high-tax countries, has led to some shifting of passive assets into countries for which the exemption was previously limited.

JEL-codes: H25 H73 (search for similar items in EconPapers)
Date: 2012
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Working Paper: The Taxation of Passive Foreign Investment - Lessons from German Experience (2009) Downloads
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