Tax & Legal

The Supreme Tax Court has laid a preliminary question before the ECJ on whether the provision setting the taxable income derived from an investment in a non-compliant foreign fund at 90% of the increase in the unit redemption price during the year is to be disapplied as a restriction on the free movement of capital going beyond what is necessary to combat tax evasion.

In a most recent decision, the Supreme Tax Court held that a foreign investment fund who received dividends from domestic stock corporations which were subject to tax withholding (capital gains tax) under the 2004 Investment Tax Act is in general entitled to a refund of this tax under the principles of EU law.

The ECJ has rejected a claim by the Commission that the German withholding tax on gross dividends discriminates against foreign pension funds, because the Commission did not substantiate the expenses excluded from deduction.

The finance ministry has published a list of documents to be produced by unit holders in “non-transparent” investment funds if they wish to avoid taxation on punitive deemed income.

The ECJ has rejected the estimated taxation of “non-transparent” investment funds as excessive taxation hindering the freedom of capital movement on shares held in foreign investment funds that do not report und publish their results in Germany in accordance with German law.

Based on the German tax provisions existing in the years in dispute 2008 through 2010, resident and non-resident special real estate funds are treated differently, which is disadvantageous for non-resident special real estate funds. In its decision the ECJ sees a restriction on the free movement of capital which cannot be justified by overriding reasons of public interest.

In this issue: PwC Reports, Official Pronouncments, Supreme Tax Court Cases, From Europe and From PwC.