Maltese Maneuver

Erich Sixt’s views on taxes are anything but secret. The Munich-based millionaire and car rental magnate has gone on the record numerous times to air his grievances, and he never minces his words. There should be tax cuts, he has said, the German tax system is “ludicrous” and the government’s “greed for money is insatiable.” He even once told the German business daily Handelsblatt, “There’s only one thing I want the government to do, and that’s protect my freedom.”

Unfortunately for Sixt, the government doesn’t seem overly concerned about the wishes of a single businessman. It’s a bit preoccupied setting rules that companies and individuals must adhere to equally, such as the matter of how much a person must pay in taxes, and where. These rules are, of course, flexible, depending on the financial possibilities and tax tricks at one’s disposal. Erich Sixt, who is still the chairman, largest shareholder and undisputed boss of the car-rental company that bears his family name, certainly has the necessary means to interpret such rules very broadly.

One such instrument is the Sixt subsidiary Sixt International Services GmbH, which has proven itself adept at recouping a large share of the taxes the company pays. To that end, it relies on a detour across the Mediterranean Sea to the tax haven Malta, a European Union member since 2004. Sixt International Services, formerly Sixt Financial Services, is technically incorporated in Pullach, Germany, a suburb of Munich. But internal data from the Maltese corporate register featured in the Paradise Papers list it as an “Oversea Company.” A spokesperson for Sixt said this is because the company’s management and administration is located “exclusively in Malta.”

But why? The purpose of the Maltese-Bavarian company appears to be to provide other, related companies within the Sixt corporation with money in the form of internal loans. According to a company report, Sixt International Services lent more than 360 million euros to other Sixt companies in 2015. This is an advantage for Sixt because the companies owing the debt are able to write off interest payments and thus pay less in taxes. When contacted, Sixt provided no details about whether and how much Sixt saves in taxes as a result of the arrangement.

The real trick in Sixt’s Maltese maneuver is this: Companies holding debt are allowed to write off interest payments from their taxes entirely; at the same time, interest revenues for creditors in Malta are almost entirely tax-free. Sixt International Services does have to pay its normal tax rate, but it is able to reclaim up to six-sevenths of taxes paid from Malta, a tax haven. The respective providers of such company constructs advertise that, after successfully reclaiming their money, companies ultimately pay a corporate tax rate of only 5 percent.

A spokesperson for Sixt confirmed to the Süddeutsche Zeitung that the company has taken advantage of this arrangement but would not say how much money it had saved by doing so. He stressed that Sixt was a regular company and that everything it did was completely normal. He also noted Sixt’s company-wide tax rate of 30 percent. It’s difficult to pinpoint the Malta trick in Sixt’s annual report because the company appears to only be based in Pullach. Sixt explains this by stating that only the “registered headquarters and not the place of effective management” is required to be listed in the company report.

Erich Sixt considers the media’s pursuit of tax evaders “populist.” But that didn’t stop the company from adopting the issue for one of its ad campaigns, which are generally coordinated very closely with the boss. Following the publication of the Panama Papers in April 2016, Sixt’s marketing department quickly came up with a new attention-grabber. “Get ‘em, boys!” it read in bold letters, followed by the line: “Rental cars for tax investigators at over 4,000 stations worldwide – including Panama.”