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.
In a most recent judgment, the Supreme Tax Court decided that in a case where an employee working in both Germany and Switzerland until the termination of the employment relationship and thereafter is irrevocably released from his duties with continued payment of his salary, the income from employment pursuant to Art. 15 para. 1 sentence 1 of the double tax agreement between Germany and Switzerland is subject to tax only in Germany as the country of residence.
The trade tax allocation of permanent establishments extending over more than one municipality ("multi-municipality permanent establishments") must by way of typification consider the specific character and nature of the permanent establishment and the interests of the municipalities involved. The Supreme Tax Court held that, in the case of permanent establishments constituted through a natural gas pipeline, the volume of natural gas supplied in the respective communities can be a suitable approach for allocation of the trade tax.
In a most recent decision, the Supreme Tax Court held that payments for granting cable retransmission rights may be added back for trade tax purposes pursuant to Section 8 No. 1 (f) of the German Trade Tax Act.
In two decisions, the Düsseldorf Tax Court commented on the profit allocation regarding the operation of a transnational pipeline network between Germany, Belgium and the Netherlands through so-called pipeline operating sites which are permanent establishments from a tax point of view.
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 1 February 2022 the Federal Ministry of Finance (MoF) has sent the draft of a Ministry circular on the income tax treatment of profit participation rights (PPR) to the professional associations for comment. Following the results of the joint meeting of the heads of the corporate and personal income tax departments of the highest tax authorities of the federal states the MoF has published the final version of its circular on 12 April 2023.
According to the Supreme Tax Court the principles developed for leasing agreements regarding the attribution of economic ownership cannot be applied fully and without reservations to the transfer of the use of film rights.
Towards the end of 2024 the Federal Ministry of Finance (MoF) commented in some detail on the input VAT deduction for credit institutions. The ministerial pronouncement focuses on the attribution of input transactions to output transactions and the relevant input VAT allocation in accordance with Section 15 (4) VAT Act. Another focus of the MoF circular is on cross-border structures and specifically the services between local branches and their foreign head office and vice versa.
The German Federal Parliament passed the Annual Tax Act 2022 on 2 December 2022. Among other provisions, the Act introduces (transitional) legislative changes to the taxation of payments for IP rights that are registered in a German register between foreign taxpayers.
In a most recent judgment, the Supreme Tax Court held that a method for allocating a standardized total price for a certain product that results in a proportionate sales price for a combination of goods (here: „economical menu” or “best value meal“ in the „system gastronomy“) that is higher than the individual sales price is not appropriate.
The Federal Ministry of Finance (MoF) has updated its information on the taxpayer's main rights and obligations to cooperate during the external tax audit.
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.
An ECJ advocate general has suggested the court rule that a German practice of allowing deferral of taxation on the hidden reserves (appreciation in value) in intangible assets transferred abroad is proportional and reasonable in the light of the overall need to ensure a fair distribution of taxing rights between member states.
As the state of employment, Germany has the right to tax a severance payment to the extent that the employee has exercised the activity in Germany. According to a decision of the Supreme Tax Court in the case of cross-border situations, the exclusion to tax benefits in kind from the exercise of share options and comparable rights under tax treaty law is based pro rata temporis on the place of employment of the employee during the vesting period (defined as the period in which the employee is entitled to acquire the options).
The provision of Section 5 (3) of the Financial Accounts and Exchange of Information Act is in compliance with constitutional law. In particular, the automatic exchange of financial account information does not violate the right to informational self-determination of the taxpayers affected by it. This was ruled by the Supreme Tax Court who stated that the right of individuals to decide for themselves on the disclosure and use of their personal data is not unduly impaired.
The Regional Tax Court of Muenster held that a loss from the exchange of profit participation rights for shares in a registered cooperative ("eG") and bonds may be set off against income from capital investments. Thus, the tax office's attempt to regard the loss as belonging to the non-taxable private asset portfolio of the plaintiff failed.
In his Opinion of 20 January 2022, the Advocate General (AG) suggests to the European Court of Justice (ECJ) that Germany’s requirements for withholding tax claims filed by non-resident corporate taxpayers with seat or place of management in the EU or EEA are too strict in two respects and thus in violation of Article 63 TFEU on the free movement of capital.
In a preliminary request from the Administrative Court Wiesbaden (Germany) the Advocate General (AG) is of the opinion that the supervisory authority has an obligation to act when it finds a breach while investigating a complaint. However, the decision as to what corrective action to take depends on the specific circumstances of each individual case.
An ECJ advocate general has suggested the court recognise a restriction on the free movement of capital from the differing treatment of the corporation tax underlying domestic and foreign dividends, but hold it to be justified in the interests of maintaining the internationally agreed balance of taxing rights.
