Tax & Legal

The Supreme Tax Court has held that the application of the pre-2008 “thin capital” rule to disallow interest on related party finance breaches the discrimination prohibition of double tax treaties.

An ECJ advocate general has suggested that taking the exempt foreign service allowance of a resident French civil servant into account when fixing the tax rate on her other income is not discriminatory.

The Supreme Tax Court has held that the thin capital rules in force up to 2007 are in breach of the non-discrimination clause in the Swiss double tax treaty.

The Supreme Tax Court has upheld the German disallowance of one-half of the long-term interest expense for trade tax as not conflicting with the Interest and Royalties Directive and not infringing the German/Dutch tax treaty prohibition on discrimination.

The ECJ has held that the continued liability to German tax on German sources income of a former resident is not discrimination prohibited by community law.

The Supreme Tax Court has confirmed that a minimum tax rate levied on non-residents earning business income in Germany does not offend against the non-discrimination clauses of international treaties.

The Supreme Tax Court has held that failure to recognise a British company as an Organschaft parent infringes the tax treaty prohibition on discrimination.

An ECJ advocate general has suggested the court rule that there is no conflict between the discrimination prohibition of the EU/Swiss free movement agreement and the Swiss/German double tax treaty provision for the continued German taxation of German source income of a former resident.

According to a judgment of the Supreme Tax Court, a U.S. citizen with limited tax liability in Germany is not entitled to the right of full tax assessment for income from employment even if he lives in an EU or EEA state (here: the Netherlands). The non-discrimination clause in Article 24 of the German/US double tax treaty does not give rise to a claim to equal treatment with a German national with limited tax liability.

An ECJ advocate general has suggested that a tax treaty can justify a hindrance on the free movement of capital from granting a tax credit privilege to recipients of a dividend from a third country but not to those with dividends from a member state.

The ECJ has held that a non-resident with German property income must be entitled to deduct the cost of an annuity if the annuity would not have been paid without the acquisition of the property.

The ECJ has held that a non-resident taxpayer must be able to deduct an annuity paid in consideration for a business interest on the same lines as a resident.

The finance ministry has decreed that a Supreme Tax Court judgment accepting a British company as the parent of a trade tax Organschaft is not to be followed as a precedent.

The Lower Tax Court of Munich referred preliminary questions to the European Court of Justice regarding the compatibility of the German regime of dividend withholding tax imposed on a Canadian pension fund with the free movement of capital as provided in Article 63 of the Treaty on the Functioning of the European Union.

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.

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 Supreme Tax Court has held that the 5% expense disallowance on tax-free dividends was, up to 2002, a restriction on the freedom of establishment rather than of capital movement and could thus be upheld in respect of a 33% share in a US company.

The Supreme Tax Court has upheld the VAT Act provision that a VAT refund claim of a non-EU/EEA company must be signed by an authorised signatory.

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.

An ECJ advocate general has asked the court to rule that a German deduction for personal expenses be extended to non-residents if they would not have had the income without the obligation.