Fast food and franchise

http://www.grprainer.com/en/Franchise-Law.html A well-known fast food chain has terminated the contract with one of its franchisees in Germany, but the latter is fighting back. There are several pitfalls that one needs to be mindful of regarding franchise agreements.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: The dispute between a well-known fast food chain and a large franchisee running 89 restaurants in Germany has been going on for some time. The franchisee’s restaurants made negative headlines due to poor working conditions and hygiene shortcomings. The franchisor subsequently called things to a halt and terminated the contract. The franchisee was forbidden by means of an interim injunction from using the company logo and product descriptions, but has since lodged an objection. A court must now provide clarity.

In the meantime, several of the branches have closed and a lot of employees are worried about their jobs because the employment contracts were concluded between the franchisee and the employees. The fast food chain is unable to preserve the jobs even if it wants to.

The case is a powerful demonstration of how tricky it is to draft a franchise agreement. The rights and obligations of both contractual parties must be precisely defined, as misconduct on the part of the franchisee can damages the franchisor’s reputation. On the other hand, a franchisee may be faced with insolvency if the contract is terminated. It is therefore imperative for both sides to protect themselves in advance and consider all eventualities so as to avoid costly legal disputes at a later date.

It is normally the case that both sides benefit from franchising. The franchisor is able to expand its distribution network and the franchisee can build upon an established product as well as a tried and tested sales concept. However, the case in question shows that things do not always run so smoothly in reality. There are no uniform statutory standards for franchise agreements because they are a type of hybrid agreement that concerns many other legal fields. In addition to elements of sales and rental contracts, particular attention must also be paid to the provisions of trademark law.

In light of the large number of factors that need to be considered with respect to franchise agreements, they should not be concluded without legal assistance. Experienced lawyers with a high degree of expertise in the various legal fields concerned can contribute to the drafting of the agreement so that it is legally sound and the interests of those involved are given due consideration.

http://www.grprainer.com/en/Franchise-Law.html

Ruling on inheritance tax unnerves family businesses

http://www.grprainer.com/en/Business-Succession.html The German Federal Constitutional Court’s (Bundesverfassungsgericht) ruling on inheritance tax is unsettling many businesses. Tax privileges for company heirs shall be limited going forward.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: On December 17, 2014, the Bundesverfassungsgericht ruled that the favourable treatment of company heirs vis-à-vis private heirs is unconstitutional and called on the legislature to create a new regime by June 30, 2016. However, the Court also held that it is legitimate in principle to confer favourable tax treatment on family inheritances in the context of company succession in order to preserve jobs.

Yet the permissible extent of this privileging was said to be debatable. The size of the firm can be a decisive factor. Particularly large family businesses should anticipate tougher rules. Currently, a so-called needs test comes into play. Large companies can thus only reckon with tax privileges if they pass this test. It is not yet certain which criteria need to be met for this purpose, but liquidity could play a role.

Not much is expected to change for medium-sized businesses with more than 20 workers. They will have to demonstrate based on the payroll that jobs have largely been retained. Things will probably be more complicated for smaller firms. To date, they have not had to prove jobs have been preserved. This is likely to change in the future.

The German Finance Minister, Wolfgang Schäuble, has since announced that the required reforms are to be swiftly implemented, but that tax privileges for company heirs will essentially be maintained with only the contested aspects being reorganised.

That being said, many issues remain unresolved for family businesses as things stand, such as how many employees a firm must have to be considered a large business or still a medium-sized one. Family businesses seeking to make arrangements for company succession in the near future ought to address the matter at an early stage, since the existing rules continue to apply until the reform has come into effect. In order to arrange company succession in a way that is optimal from a tax perspective and avoid jeopardising the existence of the business, businessmen can turn to lawyers and tax advisors who are experienced in the field of tax law and are able to provide them with expert advice on company succession from the outset.

http://www.grprainer.com/en/Business-Succession.html

Minimum wage creates new obligations for employers

http://www.grprainer.com/en/Employment-Contract.html The statutory minimum wage of 8.50 euros per hour applies in Germany as of this year. One in every eight businesses, or twelve per cent, throughout Germany are affected by the minimum wage.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: Although this rule sounds simple and clear, it raises many questions and also demands quite a lot of employers.

This is because there are also exceptions to the statutory minimum wage. Minimum wage legislation covers all employees. It is irrelevant whether the job is full-time, part-time or a “mini-job”. Employers have to pay the statutory minimum wage. For the purpose of this legislation, apprentices, self-employed persons and volunteers are not considered to be employees. Moreover, people under the age of 18 who have not completed a vocational training course are exempted from the minimum wage. In the case of the long-term unemployed who have been without a job for one year or longer, the minimum wage need only be paid following the first six months of the employment relationship. There are also exception that apply to interns.

Compensation for overtime can be arranged in different ways. Employer and employee can agree to remunerate overtime with compensatory time off. In that case, the latter does not have to be paid the minimum wage. This agreement regarding a flexitime wage record must be made in writing.

However, employers are not merely responsible for making sure that the statutory minimum wage is paid within their own companies. If, for instance, sub-contractors are engaged, employers are also liable for ensuring that the minimum wage is paid in these companies. The so-called general contractor is then liable for any infringements of minimum wage legislation.

Furthermore, minimum wage legislation requires substantial documentation obligations of employers in the case of persons in marginal employment. The beginning, end and duration of the daily working time have to be recorded and retained for a period of two years. This particularly affects industries such as catering, passenger transportation, industrial cleaning or transport haulage. The employer is not allowed to count holiday pay towards the minimum wage.

Minimum wage legislation encompasses many obligations and, as always, there are issues that remain unresolved. Where there are questions concerning the minimum wage and other employment-related issues, those concerned can turn to lawyers who are competent in the field of labour law.

http://www.grprainer.com/en/Employment-Contract.html

Inheritance tax: Cuts for company heirs

http://www.grprainer.com/en/Business-Succession.html Following the German Constitutional Court’s (Bundesverfassungsgericht) ruling at the end of 2014 that inheritance tax must be partially reformed, company heirs may be faced with large cuts.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: On December 17, 2014, the Bundesverfassungsgericht held that the privileged status of company heirs vis-à-vis private heirs is in part unconstitutional. The German Government has until mid-2016 to make improvements. Germany’s Finance Minister, Wolfgang Schäuble, has now presented the first set of possible key points for the reform of inheritance tax.

A central aspect of this which has been met with a lot of criticism is the use of up to half of a company heir’s private assets to settle the tax liability where an inheritance or gift is valued at 20 million euros or more. If the businesses concerned nevertheless wish to profit from the tax concessions, they have to demonstrate on the basis of a needs test that the continuity of the business would be put at risk by inheritance tax. Critics consider the threshold of 20 million euros to be far too low and the burden placed on family businesses far too high.

Company heirs have to date been able to benefit from massive tax privileges within the context of company succession. As long as the payroll remained stable over seven years and jobs were thus maintained, between 85 and 100 per cent of inheritance tax could be avoided. In future, this payroll condition shall only apply to businesses valued at more than one million euros.

These key points are not yet a done deal; the reform also has to be approved by the Bundesrat, and various federal states have already heavily criticised the plans.

It is nonetheless certain that the privileges enjoyed by company heirs will be restricted. Businesses for which company succession has to be arranged in the near future should therefore take prompt action in order to take advantage of the tax concessions, as retroactive effect of the reform back to December 17, 2014 is presumably not envisaged. In order to structure the transfer of the company in a way that is optimal from a tax perspective and avoid jeopardising the existence of the business, businessmen can turn to lawyers and tax advisors who are experienced in the field of tax law and will provide expert advice from the outset regarding the transfer of the business.

http://www.grprainer.com/en/Business-Succession.html

Tax evasion: More than 18,000 proceedings suspended following voluntary disclosure

http://www.grprainer.com/en/Voluntary-Disclosure.html The number of voluntary declarations in cases of tax evasion is increasing and with it the number of suspended proceedings. More than 18,000 proceedings were suspended in 2013 according to media reports.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: The exchequer and tax evaders benefit in equal measure from voluntary disclosure in cases of tax evasion, as the state is delighted with the surge in revenues and more than 18,000 proceedings were suspended in 2013 following voluntary disclosure, thereby allowing the tax evaders to return to a state of tax compliance. In comparison with 2012, the number of suspended proceedings has thus risen by more than 50 per cent.

There is a variety of reasons for the increasing number of voluntary declarations and suspended proceedings: Cases involving prominent tax evaders, the purchase of CDs on tax evaders, the increased willingness of states to cooperate with one another as well as the planned tightening of the rules for voluntary disclosure from 2015.

However, for a voluntary declaration to be able to lead to the suspension of proceedings it must be submitted on time and complete. If the voluntary declaration is flawed then the threat of a conviction for tax evasion remains. That is why a voluntary declaration ought not to be drawn up alone or with the help of standard templates. It is safer to turn to lawyers and tax advisors who are experienced in the field of tax law. They can examine each case individually and know what information has to be included in the voluntary declaration so that it can take effect. In order to be able to suspend proceedings, the tax liability plus interest and, as the case may be, a due penalty also have to be paid within a relatively short period of time.

It is expected to be substantially more expensive from 2015. A voluntary declaration will then only lead to complete immunity if the amount of evaded taxes does not exceed 25,000 euros. This threshold has hitherto been set at 50,000 euros. In cases involving larger amounts, tiered penalties based on the extent to which taxes have been evaded shall fall due. Accordingly, sums of evaded taxes of up to 100,000 euros will incur a ten per cent penalty. The penalty amounts to 15 per cent for sums over 100,000 euros and 20 per cent for one million euros and above. It is nonetheless still possible in 2015 to avoid a conviction for tax evasion by means of a voluntary declaration.

http://www.grprainer.com/en/Voluntary-Disclosure.html

Tax evasion: Typical mistakes with voluntary declaration

http://www.grprainer.com/en/Voluntary-Disclosure.html Although there are no formal requirements for a voluntary declaration in cases of tax evasion, mistakes can result in the ineffectiveness of the voluntary declaration and the threat of a conviction.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: Tax evaders have the option of being able to return to a state of tax compliance by means of a voluntary declaration and in so doing avoid a conviction for tax evasion. However, the voluntary declaration needs to be error-free. If it is not then it may fail.

Typical mistakes with a voluntary declaration are, for instance, specifying an overly low tax liability or declaring them for periods of time that are too short. In order to avoid these and other mistakes, it is imperative that lawyers and tax advisors experienced in the field of tax law be consulted. They know what information needs to be included in the voluntary declaration for it to be complete and be able to take effect accordingly. Those who prepare a voluntary declaration alone or with the help of standard templates risk a flawed and thus ineffective voluntary declaration. The result can be high financial penalties or custodial sentences.

The voluntary declaration must be prepared in such a way that the tax office receives all of the necessary information in order to issue a new tax assessment notice. Thus, the sums of evaded taxes, the bank and the timeframe need to be clearly evident. Since the banks may require some time to furnish the necessary documents, the tax liability can also initially be estimated. However, the estimate ought to be as accurate as possible and certainly not too low. Furthermore, the authorities should be given a coherent explanation as to why the tax liability will initially only be estimated and an application filed with them to set an appropriate deadline for the submission of the missing documents.

In order for voluntary disclosure to be effective, the tax liability plus interest and, as the case may be, a penalty have to be paid within a relatively short timeframe. If this is not possible all at once, arrangements can be made with the tax office regarding instalments where appropriate.

From January 1, 2015, the rules for voluntary disclosure are expected to be tightened. The penalties are then likely to increase and the adjustment period extended from five to ten years. It is therefore advisable to submit the voluntary declaration this year.

http://www.grprainer.com/en/Voluntary-Disclosure.html

Tax evasion: Voluntary disclosure, interest and penalties

http://www.grprainer.com/en/Voluntary-Disclosure.html Voluntary disclosure in cases of tax evasion remains a possibility in 2015, but tax evaders will be asked by the exchequer to pay a heavy price.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – www.grprainer.com/en conclude: Those who wish to amend their tax return by means of a voluntary declaration should have sufficient financial reserves; it is not only the evaded taxes that subsequently have to be paid within a short timeframe but also the interest and, as the case may be, a penalty.

From January 1, 2015, tougher rules are set to apply to voluntary disclosure. The German Federal Government has already introduced draft legislation to this effect. It is generally assumed that the law will be passed before Christmas and the new rules shall then apply as of January 1, 2015.

For tax evaders who wish to return to a state of tax compliance with a voluntary declaration, this means that they ought to have sufficient financial means at their disposal, as the interest due for the evaded taxes also needs to be paid within a short timeframe from 2015. An adjustment period of ten years and an interest rate of 6 per cent p.a. can give rise to substantial sums.

It makes more financial sense to submit the voluntary declaration this year. It must, however, be timely, i.e. before the offence(s) is/are discovered by the authorities, and complete, which is to say that all tax-relevant information from the past five years has to be included. If mistakes are made in the process, the voluntary declaration may fail and there is the threat of a conviction for tax evasion. A voluntary declaration should not therefore be prepared alone or with the help of standard templates. The first step should always be to consult lawyers and tax advisors who are experienced in the field of tax law.

They know what information the voluntary declaration needs to contain, can estimate the costs and ensure that the voluntary declaration is effective. In cases involving amounts of up to 50,000 euros in evaded taxes, it can lead to complete immunity. Where larger amounts are involved, a flat-rate penalty of 5 per cent shall fall due.

It will probably be more expensive from 2015. Exemption from punishment shall then only be possible for amounts of up to 25,000 euros. If more taxes have been evaded, penalties of between ten and twenty per cent will fall due.

http://www.grprainer.com/en/Voluntary-Disclosure.html

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