Chancellor Angela Merkel’s cabinet is expected to approve a measure tomorrow to close a tax loophole used by foreign companies operating in Germany, according to legislation drafted by finance ministry and viewed by Reuters yesterday.

The legislation, which would still need approval by the German parliament, is expected to take effect from 2018 and result in €30 million in additional income for German federal, state and local governments, according to the draft.

The legislation calls for tightening rules that allow deduction of certain internal expenses to discourage firms from transferring patents, licences, concessions and market rights to other countries that either apply low taxes or none at all.

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