Tax & Legal

At the beginning of November 2017 the Federal Finance Ministry published the long-awaited circular on its intended application of the rules (Section 50a Income Tax Act)applying to limited taxpayers and withholding tax on cross-border licensing of software and databanks.

In two decisions the European Court of Justice (ECJ) held that the General Data Protection Regulation (GDPR) opposes two data processing practices by credit information agencies. While ‘scoring’ is permitted only under certain conditions, the prolonged retention of information relating to the granting of a discharge from remaining debts is contrary to the GDPR.

The Supreme Tax Court held that services provided by a US-resident online-dating agency to German resident private users constituted electronically supplied services, with their place of supply in Germany.

The Constitutional Court has rejected a complaint from a taxpayer against a court order for a house search after the secret service gave a CD with income data from Liechtenstein to the tax authorities.

In a recent decision, the Supreme Tax Court commented for the first time on the requirements and scope of the right to information under the General Data Protection Regulation.

The finance ministry has announced that it considers negative interest charged by banks on deposits as a non-deductible expense and interest paid by banks on refunds of loan handling fees as income subject to withholding tax.

According to a press release issued today the Cabinet has decided to extend the retention period for accounting documents at banks, insurance companies and securities institutions to ten years. The amendment to the law aims to combat tax evasion and strengthen effective tax enforcement. This will enable large-scale tax evasion cases, such as those involving cum/cum and cum/ex transactions, to be vigorously prosecuted.

Germany and the UK have signed a double tax treaty on bank levies for retrospective application to January 1, 2011.

Germany and Switzerland have initialled a treaty for the anonymous taxation of German assets in Switzerland whilst respecting the Swiss bank secrecy for criminals.

In a recently published decision, the Supreme Tax Court has for the first time commented on the requirements for claims of damages before the tax court against a tax authority due to violation of data protection regulations. Such action for damages pursuant to Art. 82 of the General Data Protection Regulation (GDPR) is generally inadmissible (for want of being adversely affected or burdened) if there has been no prior out-of-court request of the claim.

The Supreme Tax Court has granted a bank the right to claim a refund of its costs in answering a tax office request for copies of a customer’s bank statements.

The ECJ has held that portfolio management services provided by a bank do not fall under the investment dealing exemption, but are, as a financial service, taxable in the country of the non-business customer.

The cabinet has adopted a bill to regulate the automatic exchange of bank account and investment income information with the 60 co-signatory states of the “multilateral competent authority agreement on automatic exchange of financial account information”.

According to a ruling of the Supreme Tax Court the sole criterion for claiming the banking privilege for trade tax purposes is that the assets from banking transactions and the purchase of monetary receivables outweigh the assets from other business activities. With its decision the court thus keeps to the strict wording of the relevant statute.

The Supreme Tax Court has upheld a lower court ruling absolving a bank officer from liability for his complicity in supporting the probable evasion of tax on interest income by customers.

In a Belgian case, the European Court of Justice clarified the term "personal data" and the conditions under which a sectoral organization, insofar as it provides its members with a framework of rules on consent to the processing of personal data, is to be classified as a "joint controller"’ within the meaning of the General Data Protection Regulation (GDPR). The ECJ also comments on the limits of the joint and several liability of such an organization.

According to Section 6(1) no. 3 Income Tax Act, non-interest-bearing liabilities with terms of at least 12 months, which do not constitute a deposit or advance payment, are to be discounted, i.e. a fictitious interest component (interest rate 5.5%) is initially deducted from profits and added back to profits in subsequent years as notional interest over the term of the loan.

The finance ministry has announced the arrangements for claiming withholding tax exemption under the EU Parent/Subsidiary Directive on dividends on shares held in the custody of a bank.

The Cologne Higher Regional Court decided on 3 May 2023 that a former chairman of the board of a registered association has no right to have his personal data deleted from the Associations Register.

The Supreme Tax Court has held that tax auditors may only evaluate taxpayer data in the taxpayer’s offices or in their own tax offices and must delete it once the assessments for the year in question are final.