Tax & Legal

In a most recent decision, the Supreme Tax Court held that foreign currency losses on shareholder receivables similar to loans do not reduce the taxable income of the corporation. This was decided by the Supreme Tax Court in its interpretation of Section 8b (3) Corporation Tax Act as valid in 2014 and which deals with investments in other corporations and the non-deductibility of losses in connection with certain shareholder loans.

The finance ministry has issued a decree accepting a Supreme Tax Court judgment that currency booths are a service for VAT, but allowing a business accepting payment in foreign currency a full input tax deduction.

Where a company, which has acquired investment units in US dollar denominated equity funds, writes down the value of the investment units to their fair market value following an unfavourable development in the foreign currency exchange rate, the company must add the write down back off-balance sheet.

The Supreme Tax Court has held that the hedge costs on a foreign currency loan are to be deducted from the interest received in calculating the net foreign income as the basis for the foreign tax credit available.

The finance ministry has decreed that a Supreme Tax Court ruling that an option premium is expense on the decision not to exercise the option applies to hedges, but not to speculations.

The Supreme Tax Court has held on a literal interpretation of the statute that an unrealised exchange gain on opting for tonnage tax does not qualify for the trade tax privilege for shipping income when realised.

The Supreme Tax Court has refused a taxpayer a deduction for a series of short-term losses incurred through speculating in foreign currencies.

UPDATE: In its session on 25 June 2021, the Bundesrat gave its approval to the Act to Modernise Corporate Income Tax Law. The Bundesrat thus followed the recommendation of the Finance Committee. The law is should enter into force on 1 January 2022.

At a sitting on 23 September 2016, the Federal Assembly (Bundesrat) has responded to the draft of the Act to Implement the Amendments to the EU Mutual Assistance Directive and to Introduce Further Measures to Combat Profit Reduction and Profit Shifting (“the draft Act”) and proposed further measures.