Germany: Draft guidance on hybrid mismatch rules

Comments are due 10 August 2023.

Comments are due 10 August 2023.

The Federal Ministry of Finance (BMF) published draft guidance (dated 13 July 2023) on the prohibition of the deduction of expenses in the case of tax mismatches due to hybrid mismatch arrangements (section 4k Income Tax Act (ITA)). 

The BMF draft guidance contains 128 paragraphs on 52 pages. The core of the guidance is explanations of the tax mismatches rules in section 4k (1) to (5) ITA and the resulting prohibitions on deducting operating expenses (marginal no. 19 to 116). The guidance also includes provisions relating to:

  • Existence of a so-called structured arrangement within the meaning of section 4k para. 6 ITA (marginal no. 10 and 11)
  • Taxpayer's duty to co-operate (marginal no. 120, 121)
  • Relationship of the anti-hybrids rules to other business expense deduction prohibitions (marginal no. 124 to 128)

Comments on the draft guidance are due 10 August 2023. Publication of a final version of the guidance is not expected before September 2023.

Read a July 2023 report [PDF 260 KB] prepared by the KPMG member firm in Germany



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