The Berlin-Brandenburg Tax Court decided that the relevant double tax agreement with the US requires US withholding tax on dividends to be credited against German trade tax even though the Trade Tax Act does not contain any provisions equivalent to the tax credit rules for corporation tax. It is interesting to note that the Hesse Tax Court had already decided likewise in a decision from February 2021.
The North Rhine-Westphalia (NRW) tax authorities have now compiled all the important information on the tax obligations of influencers and published it on a central website.
At its meeting on 5 June 2024, the Federal Cabinet adopted a government draft for the
Finance Act 2024 (FA 2024). Despite numerous revisions, the material amendments from the original draft from 8 May 2024 have been limited. The main changes are shown in italics and red in the following summary of the government draft in italics and red.
On 17 May 2024, the Federal Ministry of Finance (MoF) sent a draft bill for the Finance Act 2024 (FA 2024) to the professional associations for comments by 24 May 2024. The draft has now also been published on the MoF website. The law is intended to implement changes to various areas of German tax law which need adjustment. The focus is on adjustments required by EU law and case law of the European Court of Justice (ECJ), the German Federal Constitutional Court, and the German Supreme Tax Court. Furthermore, follow-up amendments to previous legislative changes will be made. This blog summarises the key content. - Meanwhile the Federal Cabinet has approved the draft bill (see Update further below at the end of this post).
On 22 March 2022, after tough negotiations, the Bundesrat (Federal Council) approved the compromise reached by the Mediation Committee on the text of the Act to Strengthen Growth Opportunities, Investment and Innovation as well as Tax Simplification and Fairness (Growth Opportunities Act).
In its session of 21 February 2024, the Mediation Committee of the Bundestag and Bundesrat concluded its negotiations in relation to the Act to Strengthen Growth Opportunities, Investment, and Innovation as well as Tax Simplification and Fairness
On 13 November 2023, the German Federal Ministry of Finance (MoF) published identical decrees issued by the highest tax authorities of the German Federal States on the allocation of trade tax between municipalities in case of large-scale battery storage systems for storing wind and solar energy (according to the provisions set forth in Section 29 Trade Tax Act).
On 20 June 2022, the German Federal Ministry of Finance (MoF) published identical decrees issued by the supreme tax authorities of the Federal States on certain application issues in relation to the extended reduction of trading income pursuant to Section 9 No. 1 Sentences 3 and 4 of the Trade Tax Act as amended by the “Act to strengthen Germany as a location for funds and to implement Directive (EU) 2019/1160 amending Directives 2009/65/EC and 2011/61/EU with regard to the cross-border marketing of undertakings for collective investments” – in short the “Fund Location Act” of 17 June 2021.
The Regional Tax Court of Hesse held that withholding tax levied in Canada on dividends distributed by a Canadian corporation to a German corporation should be credited against German trade tax. The tax authorities have in the meantime launched an appeal against this judgment and the case is now pending before the Supreme Tax Court for final clarification.
In the night of 3-4 June, coalition partners CDU/CSU and SPD agreed on a crisis management package to mitigate the economic impact of the COVID 19 pandemic.
For income tax purposes, income of a partnership from leasing and letting or from capital assets is to be reclassified as trading income where the partnership also receives a negligible amount of income from a participation in a trading partnership; however, such “tainted” income is not subject to trade tax.
Two decisions of the Baden-Württemberg Tax Court have been published in connection with the attribution of foreign passive income for trade tax purposes. In these decisions the Court also raises doubts as to whether the add-back of this type of foreign income is compatible with EU law.
In a decision on 10 April 2018, the German Constitutional Court concluded that the complaint that the trade tax treatment of gains from the disposal of partnership interests was unconstitutional because it contravened the principle of equality was not justified.
The First Senate of the Federal Constitutional Court heard arguments on the constitutionality of a provision in the Trade Tax Act, according to which trade tax was levied on the sale of business interests. The case has opened up a question of principle with regard to trade tax.
In its decision of 12 May 2016 the Supreme Tax Court held that -in the case of a two-tier partnership structure- the trade tax loss carry-forward of the lower-tier partnership is fully eliminated, if the upper-tier partnership, which holds a 100% -interest in the income and assets of the lower-tier partnership, is merged down-stream and thus ceases to exist. Referring to previous case law, the Court’s reasoning was that the upper-tier partnership, as co-entrepreneur of the lower-tier partnership, was also the holder of the partnership’s trade tax loss-relief.
The Supreme Tax Court has held that restricting a trade tax privilege to domestic units of a tax group does not infringe a group’s freedom of Establishment.
The Supreme Tax Court has held that there is no constitutional objection to the partial disallowance of rental costs for trade tax, even if the tenant has sublet the premises.
The Supreme Tax Court has held that the provision in the Trade Tax Act requiring that foreign dividends on shareholdings of up to 10% be charged to tax if received in 2001 is contrary to European law and must be disapplied for that year.
The Supreme Tax Court has held that the sale of a partnership share is subject to trade tax if the tax effective dates of sale and of its acquisition of the business of its GmbH subsidiary through merger are identical.
