Tax & Legal

A major reform of the international tax system finalized on 8 October 2021 at the OECD will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023. The landmark deal will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.

The Bundesrat has passed a bill to charge dividend income on investments of less than 10% to corporation tax.

In case of merger of a corporation into a partnership during the year the Supreme Tax Court decided that the acquiring legal entity as the ("new") controlling company also fulfills the requirement of financial integration as a prerequisite for a tax group („Organschaft“) of the former controlling company even if the conversion is not made with retroactive effect from the beginning of the financial year.

The Supreme Tax Court has held that the interest paid to a corporation on an overpayment of corporation tax is taxable income in contrast to the position of income tax payers up to 2010.

An ECJ advocate general has suggested the court give rather general guidance on the calculation and verification of the creditable corporation tax underlying a dividend from another EU country.

A new publication has been introduced: PwC's first Tax perspective from its 16th Annual Global CEO Survey - A focus on tax and corporate reputation.

In two recent decisions published on 28 November 2024, the Supreme Tax Court commented on the tax privileged non-profit status (public-benefit purpose) of extremist corporations and the presumption of conformity resulting from a Federation’s or a Land’s report on the protection of the constitution according to Sections 51 (3) sentence 2 of the German Fiscal Code.

UPDATE: In its session on 25 June 2021, the Bundesrat gave its approval to the Act to Modernise Corporate Income Tax Law. The Bundesrat thus followed the recommendation of the Finance Committee. The law is should enter into force on 1 January 2022.

Despite apparently favourable ECJ judgments, the Supreme Tax Court has once again refused a taxpayer credit for the foreign corporation tax due on a dividend received during the currency of the old, imputation tax System.

In two judgments published in April 2025, the Supreme Tax Court decided that a corporation in which there is an atypical silent partnership can be a subsidiary within a corporation tax group. With its rulings, the court deviated from an earlier opinion of the tax authorities. The Federal Ministry of Finance has now commented on the consequences of the two judgments.

An untypical silent partnership in the controlled group company does not generally prevent the recognition of a consolidated tax group for corporation tax purposes. With this current decision, the Supreme Tax Court disagrees with the previous opinion of the tax authorities.

Under certain conditions, changes in shareholders and the admission of new investors will in future be possible without giving rise to a forfeiture of losses carried-forward. On 23 December 2016 the Act for the Further Development of Tax Loss Utilisation for Corporations was published after having been adopted by the German Parliament (Bundestag and Bundesrat) on 20 December 2016.

The Supreme Tax Court has held that a dividend paid to a US S corporation on a holding of at least 10% is subject to a 5% withholding tax insofar as its shareholders are tax-resident in the USA.

The ECJ has held the Portuguese taxation of the unrealised gains inherent in a company’s assets on change of corporate residence from Portugal to be an unjustified hindrance on the freedom of establishment.

On 14 December 2023, the German Financing for the Future Act (Zukunftsfinanzierungsgesetz, ZuFinG) went into force. The law aims at promoting corporate financing via capital markets and making shares more attractive to the public.

In a most recent circular the Federal Ministry of Finance commented on the method of the foreign corporation tax credit under the formerly applicable German imputation system. The focus of the circular are two judgments of the European Court of Justice as regards the calculation and verification of the creditable corporation tax underlying a dividend from another EU country.

In a request for a preliminary ruling, the Supreme Tax Court has referred several questions to the ECJ regarding the compatibility of non-profit tax status and the prohibition of state aid under EU law. The question to be answered is whether the extension of tax relief for special-purpose entities to companies that provide services for remuneration in cooperation with a corporation that is recognized as a non-profit organization (so-called service corporation) constitutes illicit state aid in accordance with Art. 107 of the Treaty on the Functioning of the European Union (TFEU).

According to Section 7 (8) sentence 1 of the Inheritance and Gift Tax Act, the increase in value of shares in a corporation is deemed to be a gift. In a most recently published decision, the Supreme Tax Court held that this provision does not contain any subjective elements, neither in the form of awareness of the gratuitous nature nor of an intention of personal enrichment.

The Supreme Tax Court has followed an ECJ case in holding that a foreign corporate shareholder may claim from the local tax office a refund of the tax deducted at source from its dividend.

The Supreme Tax Court has followed an ECJ case in holding that a foreign corporate shareholder may claim from the local tax office a refund of the tax deducted at source from its dividend.