An ECJ advocate general has suggested that neither the German refusal to allow a deduction for branch losses incurred in other member states, nor the recapture provision in the event of disposal of the branch offend against community law.
The ECJ has held that the denial of relief in a member state of residence for a loss made on the sale of property in another member state is not an unjustified restriction on the free movement of capital.
The Supreme Tax Court has held that rental income earned through a Hungarian partnership is not automatically exempt as the income from a foreign permanent establishment, merely because the partnership was taxed locally as a corporation, or because the income would have been treated as trading income had it been earned through a German partnership.
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 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 ECJ has held the Dutch exit tax on the transfer of a company’s place of management to another member state to be excessively burdensome. It would be sufficient to allow establishment of the tax due on the unrealised gains at the time of departure, but to defer collection until the gains are realised.
An ECJ advocate general has suggested the court accept in principle the Dutch exit tax on business, but require deferment of the actual levy until the relevant assets are realised.
The German Constitutional Court overturned a 2019 judgment of the Supreme Tax Court regarding the erstwhile change in its case law on the issue of the income correction with respect to an unsecured group loan because the tax court failed to submit the facts of the case to the European Court of Justice (ECJ) for final clarification and thus violated the complainant's right to the lawful judge under Article 101(1) of the Constitutional Statute.
