In a recently published decision, the Supreme Tax Court commented on the issue of recognizing prior ownership periods in the case of a qualified share exchange during the year with respect to the relief for dividends on qualifying holdings (trade tax intercompany dividend privilege). The court rejected a deduction of the dividend from the trade tax basis because the cut-off date “at the beginning of the period of levy” applicable under Section 9 (2a) TTA was not met since the plaintiff did not yet hold an interest in V GmbH at the beginning of the assessment period.
A sale of five multi-family properties at the same time (“en bloc sale”) in the third year after acquisition is detrimental to the extended trade tax deduction as it violates the established three-property limit within a five-year period. This was decided by the Supreme Tax Court in a most recent judgment.
The Supreme Tax Court had to decide on the profit allocation between Germany and the Netherlands in the case of construction sites. Among other things, the court held that the portion of the trading income which is attributable to the foreign permanent establishment (as not having been earned in Germany) must be eliminated from the trade tax basis according to Section 9 No. 3 Trade Tax Act even if Germany would not be prevented from taxing the entire trading income under the relevant double tax treaty.
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.
