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.
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.
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.
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.
The Supreme Tax Court has held that the corporation tax rate on the permanent establishment income of non-EU foreign companies under the old, pre-2001 system was acceptable under community law and the double tax treaty.
The Federal Ministry of Finance has sent the draft of a Ministry circular on the application of Section 8d of the Corporation Tax Act (CTA) – continuance-bound loss carry-forward after loss forfeiture - to the professional associations for comment.
In a most recent decision, the Supreme Tax Court held that the legal form of an institution is not relevant for the qualification as financial company within the meaning of Section 8b (7) sentence 2 of the Corporation Tax Act to be read in connection with Section 1 (3) of the German Banking Act. Therefore, a family foundation under private law can also be considered as finance institution if they are primarily engaged in financial activities.
In a recent judgment, the Supreme Tax Court held that Section 8b (6) sentence 2 of the German Corporation Tax Act as part of the tax exemption rules for dividends from participations in corporations and associations does not apply to savings banks that are organized as legal entity governed by private law.
The failure to tax the deemed capital gain under Section 17 (1) Sentence 2 Income Tax Act at the level of the shareholder in the case of a hidden contribution of shares in a corporation is not a reduction in income as provided in Section 8 (3) Sentence 4 Corporation Tax Act which would otherwise result in an increase in taxable income. This was decided by the Supreme Tax Court in a recently published judgment.
In a recent judgement, the Supreme Tax Court decided that the participation threshold specified in Section 8b (4) Sentence 6 of the German Corporation Tax Act (“CTA”) (10 % of the share capital) can also be attained through an acquisition transaction which is economically uniform from the acquirer's perspective in a situation where several sellers are involved in the transaction.
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.
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.
Gains realised by financial undertakings resident in third countries on the disposal of shares are fully exempt from corporation tax. In these proceedings,the Hessian Tax Court considered whether the exclusion from the benefit of the participation exemption under Section 8b (7) of the Corporation Tax Act also applied to credit institutions and financial services institutions not resident in the EU/EEA.
The ECJ has held that the foreign tax imputation credit on a dividend received from abroad is the lower of the corporation tax shown to have been paid abroad and the income tax due on the dividend by recipient.
In a recent decision, the Hamburg Tax Court commented on the deduction of income-related expenses in connection with dividends from portfolio investments paid to a family foundation who itself is not exempt from corporation tax.
The Federal Constitutional Court held that the retroactive introduction of Sec. 14 (3) Corporation Tax Act concerning the treatment of over-surrenders arising from periods prior to the membership in an Organschaft (tax consolidation group) to be in part unconstitutional and thus invalid.
In a recently published decision, the Supreme Tax Court held that a commercial activity as stated in Section 14 (1) no. 2 sentence 2 Corporation Tax Act also exists if the controlling partnership acts exclusively as managing holding company. Intra-group services for other additional commercial activities are not required.
If a corporation is merged into its parent company, which in turn is a controlled company within a corporation tax group (fiscal unity/“Organschaft”) with a corporation as the controlling company (“Organträger”), the Supreme Tax Court has ruled that no flat-rate deemed business expenses are to be added back to profits under Section 8b (3) sentence 1 of the German Corporation Tax Act (CTA) either at the level of the parent company or at the level of the controlled company, where the said non-deductible flat-rate deemed business expenses are derived from a merger gain.
