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NFTC Opposes Germany’s Proposal to Transfer Accounting Records to EU/EEA Countries
Date: 7/23/2008
Written By: Eric Thomas or Jennifer Cummings, The Fratelli Group for NFTC, 202-822-9491

Accounting Changes Unnecessary, Would Unfairly Penalize U.S. Companies

Washington, DC – The National Foreign Trade Council (NFTC) today sent letters to 16 German finance and economic ministers, in response to Germany's proposal to transfer electronic accounting records to European Union (EU) and European Economic Area (EEA) countries. The NFTC opposes the proposal because it would inflict undue penalties on U.S. companies already acting in compliance with international accounting and audit rules.

"We welcome Germany's interest in attracting and retaining investment and the German tax rate reductions recently enacted to that end," wrote NFTC President Bill Reinsch. "Our member companies are concerned, however, about the proposed change in the rules relating to the transfer of electronic accounting records to EU/EEA countries. By requiring records to be kept in Germany, the EU or the EEA, Germany is failing to recognize the global nature of today's marketplace."

Reinsch continued, "The provision requiring the immediate relocation of electronic financial records to the tax entity's home country, if so requested by the German Tax Authorities, is unreasonable in today's global marketplace….The NFTC opposes the imposition of the new territorial restrictions. Generally, all accounting activities not located in EU countries, e.g. the United States, would be considered illegal, and would be subjected to penalties of up to €250,000. The penalties should be eliminated."

"For a US-based multinational, the main accounting function is likely to reside in the U.S., and this typically includes data relevant for the companies' German operations. Under current law, companies have generally been able to maintain records in a third country without incurring punitive penalties," wrote Reinsch. "It has been possible to satisfy the record maintenance requirements by preparing regular secure backups of the data and transferring this information, when needed to the Germany-based subsidiary. The pending proposal will nullify these arrangements."

The NFTC letter requests that Germany modify the proposed rule significantly, pointing out that Germany's proposal goes beyond the reach of comparable rules in other EU member states. Reinsch concluded by citing the tax treaty recently ratified by the United States and Germany, arguing that "under the provisions of the tax treaty, financial records of U.S.-based multinationals doing business in Germany, should be permitted to be retained in the U.S., or another non-EU or non-EEA country, without penalty."

For a full copy of the letter, please click here.