Tax & Legal

In a most recent judgment, the Supreme Tax Court decided that the trade tax addback of a silent partner's profit share is subject to the free movement of capital which also applies to third countries (here: the USA). The application of the "grandfather“ clause of Art 64 TFEU (ex-Article 57 TEC) is generally not affected by statements made in a letter from a lower tax authority.

In a recently published judgment, the Supreme Tax Court decided that the restriction for tax relief under Section 7i of the Income Tax Act to domestic historical monuments and therefore the disallowance of the increased depreciation for historical monuments located abroad to be, in principle, consistent with EU law.

The EU Council Directive for mandatory automatic exchange of tax information in cross-border arrangements provides that all intermediaries and, in their absence, the taxpayer involved in potentially aggressive cross-border tax arrangements (that may lead to tax avoidance and evasion) must report them to the competent tax authorities. In a Belgian case the European Court of Justice took the chance to comment on various general aspects of the Directive.

In a recently published interim decision, the Supreme Tax Court expressed considerable doubts as to the legitimacy of the German Energy Crisis Contribution Act which was in force for years 2022 and 2023.

A foreign permanent establishment of a legally independent person resident in Germany cannot be viewed as employer. This was decided by the Supreme Tax Court in a recent judgment regarding the double tax treaties with the Netherlands, Japan, the UK, Spain, Australia, Ireland, Belgium, Switzerland, Italy, Denmark, Canada, Singapore, Norway, Greece and France.

The Cologne Tax Court is of the opinion that the preclusion of German employees resident in Switzerland for full assessment of German income tax is contrary to EU law and had referred the case to the ECJ for a preliminary ruling. In his Opinion, the Advocate General considers that the German regulation contravenes the Agreement for the Free Movement of Persons between the EU and Switzerland.

Ryanair was unsuccessful in its action against state aid from Sweden before the European General Court as the court of first instance. Within a short period of time, the airline had brought actions against 16 different state aid measures, including the Swedish case involving the state support for the local airline SAS and which is currently pending before the European Court of Justice (ECJ). In his Opinion Advocate General Pitruzzella suggests that the ECJ rejects the appeal in its entirety.

If a tax privilege which is optional under EU law was wrongfully not granted, and where the taxpayer therefore was forced to make advance tax payments, interest is payable on the eventual tax refund claim. This was decided by the Supreme Tax Court in a case where the tax office refused to apply the reduced electricity tax rate on the quantity of electricity drawn in respect of the plaintiff’s own consumption.

According to the Cologne Tax Court, the preclusion of German employees resident in Switzerland for full assessment of German income tax is contrary to EU law. The court has referred the case to the European Court of Justice (ECJ) for a preliminary ruling with respect to the Agreement for the Free Movement of Persons between the EU and Switzerland.

In a recent judgment, the Supreme Tax Court decided that, for a sub-participation of a share in a corporation - whether in the form of a typical or atypical sub-participation - the tax assessment basis is not to be determined separately and uniformly.

The free movement of capital under Article 63 of the Treaty on the Functioning of the European Union is not violated if the tax treatment of a donation to a foundation based in the Swiss Confederation is subject to national requirements that apply in the Member State of the donor. According to the Supreme Tax Court, the national legislature is not obliged to recognize the charitable status under foreign law.

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.

In most recent decision, the Supreme Tax Court held that there are no special circumstances that would allow for a retroactive determination of a carryover of donations in the year the donation was made if the correct application was not filed. However, without a separate determination, it is no longer possible to utilize the carryover in the following nine tax assessment years.

In a current circular the Federal Ministry of Finance (MoF) stated that it does not follow a judgment of the Supreme Tax Court on the requirements for the combination of business operations of public bodies with regard to Section 4 (6) sentence 1 Corporation Tax Act.

The Federal Ministry of Finance (MoF) has sent the draft of a revised version of the attribution taxation for foreign family foundations pursuant to Section 15 of the Foreign Tax Act to certain associations. They as well as interested professionals are given the opportunity to comment until 15 January 2026.

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 duty-free allowance for goods in consignments with a total value of up to 150 Euros will be completely eliminated from 1 July 2026.

With the legislative amendments providing for the enforcement of sanctions in criminal law Germany transposed EU Directive 2024/1226 which will now significantly increase liability risks for companies. A large number of violations of foreign trade law will no longer be prosecuted as an administrative offense but as a criminal offense.

In a recently published judgment, the Supreme Tax Court decided in a case involving the transfer of a limited partnership to the sole remaining limited partner in the legal form of a limited liability company (GmbH) by way of universal succession through accrual, among other things, that the limited partner's allowable loss determined at the time of termination within the meaning of Section 15a (4) of the Income Tax Act can be offset by the limited limited company against its future profits.

If a taxpayer who has incurred expenses for the maintenance of a historic building used as his or her primary residence dies before the end of the ten-year deduction period, the right to claim the deduction generally does not pass to the heir. With its most recently published decision the Supreme Tax Court confirmed its earlier case law in similar situations.