In a most recent circular the Federal Ministry of Finance commented on the method of the foreign corporation tax credit under the formerly applicable German imputation system. The focus of the circular are two judgments of the European Court of Justice as regards the calculation and verification of the creditable corporation tax underlying a dividend from another EU country.
The German Federal Constitutional Court has ruled that the transitional provision from the imputation system to the so-called half-income method in the course of the Annual Tax Act 2010 is partially incompatible with the German Basic Law and obliges the legislator to retroactively eliminate the identified constitutional violation by 31 December 2023.
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.
Pursuant to the claim for interim relief in the form of a suspension from payment the Supreme Tax Court decided that the taxation of foreign passive income pursuant to Secs. 7 et seq. Foreign Tax Act of a corporation domiciled in Hong Kong is not in serious doubt with respect to the free movement of capital and under constitutional law.
The European Court of Justice (ECJ) had to deal with questions regarding the exemption from import VAT on the re-importation into the EU of goods exempt from customs duties. Specifically, whether the import VAT exemption is accessory to the exemption from customs duties for re-imported goods or if both exemptions are to be applied independently.
The trade tax addback of foreign portfolio dividends in the year 2001 is in line with the EU provision on the free movement of capital in Article 63 TFEU (formerly: Article 56 TEC). This was decided by the European Court of Justice in an answer to a preliminary request submitted by the Supreme Tax Court.
The ECJ has held that the foreign tax imputation credit on a dividend received from abroad is the lower of the corporation tax shown to have been paid abroad and the income tax due on the dividend by recipient.
In a decision published on 26 November 2021, the Federal Constitutional Court (Bundesverfassungsgericht,) declared as inadmissible a referral by the Supreme Tax Court (Bundesfinanzhof) regarding Section 3 of the Solidarity Surcharge Act 1995 as amended on October 15, 2002 (SSA, 1995).
In a request for a preliminary ruling from Poland the European Court of Justice commented on the VAT exemption for small consignments of goods of non-commercial nature from third countries and where the recipient is residing in a Member State other than the Member State of importation.
A soccer player’s promotional activities as a “brand ambassador” do not, on their own, constitute a commercial activity if the fees paid are intended solely to compensate for specific achievements and successes in the field of soccer. This was decided by the Düsseldorf Tax Court.
The dispute before the Supreme Tax Court concerned the question of whether the tax office was correct to adjust an input VAT deduction of the plaintiff - following a successful appeal under insolvency law - where the plaintiff later received a refund of the import VAT paid. The court could not see any reasons why the plaintiff should receive a refund even though it no longer owed the tax.
The Supreme Tax Court decided that so-called “consolidation gain” from the settlement of liabilities and receivables following a universal transfer of assets from a French Société à Responsabilité Limitée (SARL) to its sole shareholder GmbH cannot be neutralized off-balance-sheet in analogy to Section 8b (3) Sentence 8 of the Corporation Tax Act.
In a most recent decision, the European Court of Justice held that that Belgium acted in breach of its obligations under the Anti-Tax Avoidance Directive (ATAD) laying down rules against tax avoidance practices that directly affect the functioning of the internal market by failing to adopt the laws, regulations, and administrative provisions necessary to comply with Article 8 (7) of that directive.
An orchestra musician employed by a public corporation in the Grand Duchy of Luxembourg is an artist within the meaning of Article 16 (1) of the double tax treaty between Germany and Luxembourg. The Supreme Tax Court has recently decided that his salary is taxable in Germany as income from employment with a credit of the tax paid in Luxembourg.
In a most recent decision, the Supreme Tax Court upheld the tax office’s refusal to allow a partnership to compute its income on tonnage tax principles – as these presuppose an intent to operate the ship in international waters in the long term. Furthermore, the court decided that the determination of profits by tonnage for a subsequent year requires that specific requirements laid down in section 5a (1) sentence 1 and (2) of the Income Tax Act as to time and deadlines are met.
On 17 May 2024, the Federal Ministry of Finance (MoF) sent a draft bill for the Finance Act 2024 (FA 2024) to the professional associations for comments by 24 May 2024. The draft has now also been published on the MoF website. The law is intended to implement changes to various areas of German tax law which need adjustment. The focus is on adjustments required by EU law and case law of the European Court of Justice (ECJ), the German Federal Constitutional Court, and the German Supreme Tax Court. Furthermore, follow-up amendments to previous legislative changes will be made. This blog summarises the key content. - Meanwhile the Federal Cabinet has approved the draft bill (see Update further below at the end of this post).
At its meeting on 5 June 2024, the Federal Cabinet adopted a government draft for the
Finance Act 2024 (FA 2024). Despite numerous revisions, the material amendments from the original draft from 8 May 2024 have been limited. The main changes are shown in italics and red in the following summary of the government draft in italics and red.
Following a request for a preliminary ruling by the Hamburg Tax Court, the ECJ held that Article 215 (4) Customs Code, dealing with the determination of the place of origin of import VAT is not automatically applicable if goods were brought into the customs territory of the EU in breach of customs rules and if they are subsequently transported to another Member State.
