The Supreme Tax Court refused to overturn the tax court’s decision to refuse leave to appeal, agreeing with the lower court that a locker can constitute a fixed place of business within the meaning of Article XI Paragraph 1 of the German/British double tax treaty.
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 government has broken with its standing policy of not signing double tax treaties with tax havens with its signature on an OECD model treaty with Liechtenstein.
The German and Austrian finance ministries have agreed to tax civil service pensions paid to widows as though payment continued to be to the original beneficiary.
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.
In a case where Germany lost the right to tax the investment in a Spanish corporation the Supreme Tax Court - in contrast to the opinion held by the tax administration - decided that the German exit taxation pursuant to Section 6 para. 1 sentence 1 Foreign Tax Act applies to the year in which the German unlimited income tax liability ends and not at the later point in time when the limited tax liability arises.
As the state of employment, Germany has the right to tax a severance payment to the extent that the employee has exercised the activity in Germany. According to a decision of the Supreme Tax Court in the case of cross-border situations, the exclusion to tax benefits in kind from the exercise of share options and comparable rights under tax treaty law is based pro rata temporis on the place of employment of the employee during the vesting period (defined as the period in which the employee is entitled to acquire the options).
According to a most recent decision of the Supreme Tax Court, the income from employment of a pilot resident in Germany and who is employed in international air traffic by a Swiss-based company is only exempt from German income tax (subject to progression) to the extent that he performs his activity on Swiss soil and in Swiss airspace in accordance with the principle of territoriality.
In a recent judgment the Supreme Tax Court decided that - according to Article 13 paragraph 1 of the double tax agreement (DTT) with France - Germany has the right to tax the severance pay as a result of the termination of an employment relationship insofar as the compensation relates to the period during which the employee (who was subject to unlimited tax liability at the time) lived and worked in Germany. The taxable amount must be calculated by considering the duration of the domestic residence compared to the term of the employment. The so-called cross-border commuter rule in Article 13 para. 5 of the DTT does not preclude Germany’s right of taxation.
The German and Swiss tax authorities have concluded a new consultation agreement regarding the group of persons to whom Article 15 paragraph 4 applies to ensure the uniform application and interpretation of Article 15 paragraph 4 of the double tax agreement between Germany and Switzerland (Federal Ministry of Finance, letter dated 25 April 2023).
In a recent ruling, the Münster Tax Court had to decide on the income tax and treaty law treatment of a severance payment received by the plaintiff as a soldier in the British armed forces
In a most recent judgment, the Supreme Tax Court decided that in a case where an employee working in both Germany and Switzerland until the termination of the employment relationship and thereafter is irrevocably released from his duties with continued payment of his salary, the income from employment pursuant to Art. 15 para. 1 sentence 1 of the double tax agreement between Germany and Switzerland is subject to tax only in Germany as the country of residence.
The distribution of profits by a Luxembourg subsidiary (in the legal form of a SARL) to its German parent company (a partnership limited by shares – KGaA) may be an abuse of legal forms where the KGaA provided SARL with a loan and shortly thereafter waived repayment, thereby putting SARL in a position to actually make the profit distribution. Even more when the losses arising from the impairment of the value of SARL because of the distribution are to be used by the shareholders in a tax-effective manner.
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.
