Tax & Legal

According to a most recent decision of the Supreme Tax Court, the income from employment of a pilot resident in Germany and who is employed in international air traffic by a Swiss-based company is only exempt from German income tax (subject to progression) to the extent that he performs his activity on Swiss soil and in Swiss airspace in accordance with the principle of territoriality.

The Supreme Tax Court has followed its previous case law in holding that the provision calling for taxation of treaty-exempt income if the other state does not exercise its right to taxation can only be applied if permitted by the treaty.

The Supreme Tax Court has held that the treaty override provision making tax exemption of foreign income dependent on tax compliance in the other state is, unless mirrored in the treaty, in breach of international law and therefore unconstitutional. It has referred to the Constitutional Court for a ruling.

The Supreme Tax Court has held that an aircraft operator qualifies for energy tax refund on the fuel used for flying goods and freight for group companies even if it does not hold a licence to operate an airline.

The finance ministry has decreed that charges by travel agents to airlines for promoting their services are subject to VAT as sales promotion.

With effect from 2011, the employment income of German resident aircrew flying for British airlines is entirely taxable in Germany, whilst the earnings of personnel flying for Irish airlines are fully taxed in Ireland.