The Supreme Tax Court has held that the exclusion of merger cost as part of the non-taxable profits and losses on merger also applies to indirect shareholdings.
The Supreme Tax Court has held that an asset transfer on death is chargeable to inheritance tax under German law, even though its basis was a foreign legal act without an exact German parallel but leading to exemption in the foreign state of residence of both parties.
The ECJ has held that immediate taxation of the difference between book and market value of assets moved to another member state goes beyond what is necessary to preserve the legitimate interests of the first state in preserving its tax base if the same move within the country would be tax-free.
The Supreme Tax Court has held that the simple transfer of a relief fund’s assets to a company which also assumed the related pension obligations shows that it was not previously assured that the assets would only be used for fund purposes. Accordingly, the tax exemption enjoyed in previous years must be withdrawn in retrospect for all years for which tax claims are not yet statute-barred.
In the case of the partial transfer of individual business assets pursuant to Section 6 (5) Sentence 3 No. 2 Income Tax Act, the taxable profit is not to be determined by adhering to the so-called strict separation theory but rather according to the modified separation theory with proportional allocation of the book value up to the amount of the partial consideration. This was decided by the Supreme Tax Court in a most recently published judgment.
The Federal Constitutional Court held that § Section 6 (5) Income Tax Act providing for the transfer of business assets at book values to be incompatible with the German Basic Law insofar as it rules out a transfer at book value between partnerships with identical shareholding. This exclusion from the tax privilege is incompatible with the general guarantee of the right to equality and thus not justified.
In a reference for a preliminary ruling from the UK Upper Tribunal the European Court of Justice (ECJ) is asked whether the immediate tax charge on a transfer of assets from a UK resident company to a sister company resident in Switzerland (which does not carry on a trade in the UK through a permanent establishment) contrasts with EU-Law (Article 49 TFEU or Article 63 TFEU).
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).
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.
