The finance ministry has reissued its slightly modified regulations to be followed by those responsible for deducting tax on investment income at source.
The finance ministry has issued a decree on a number of technical points in connection with the obligation of banks to withhold tax from the investment income of private individuals.
The Supreme Tax Court has held that a benefit from a foreign company to a German shareholder is a hidden distribution taxable in Germany as investment income.
The Constitutional Court has held the blanket disallowance of 5% of dividends and capital gains realised by companies to be constitutionally acceptable.
Recurring remuneration from an employee's mandatory employee profit participation right (PPR) is not generally covered by the provisions of Section 19 (1) sentence 1 no. 1 Income Tax Act (ITA) for income from employment. This was decided by the Supreme Tax Court in a most recently published judgment.
The Regional Tax Court of Muenster held that a loss from the exchange of profit participation rights for shares in a registered cooperative ("eG") and bonds may be set off against income from capital investments. Thus, the tax office's attempt to regard the loss as belonging to the non-taxable private asset portfolio of the plaintiff failed.
Regarding the redemption of so-called gold warrants, the Supreme Tax Court decided that taxation as „other claims from capital investments“ within the meaning of Section 20 (1) No. 7 Income Tax Act cannot be ruled out on grounds that the holder of the capital claim has the right to demand fulfillment by means other than cash. If the holder exercises this option, the transaction constitutes a taxable redemption and is treated as income from capital investment.
In a recent ruling, the Supreme Tax Court held that the deemed settlement of final withholding tax under Section 43 (5) Sentence 1, Half-Sentence 1 Income Tax Act (ITA) also applies if the tax has been withheld by the debtor (payer) of the investment income, but not declared and paid over to the tax office. As a result, investment income from a fraudulent pyramid scheme is in principle no longer to be included in the income tax base.
The Supreme Tax Court has rejected an assessment to gift tax on a supposed hidden distribution to a shareholder on the grounds that a shareholder’s receipt of a hidden benefit is his investment income.
The Supreme Tax Court has held that commodity warrants are not financial investments; thus gains on their sale or redemption are not taxable as investment income.
The Supreme Tax Court has held that lapsed options based on market rate movements rather than on a conscious decision by the taxpayer are not deductible from investment income.
Recurring remuneration from a typical silent partnership between the employee and the employer company is taxable as capital investment income within the meaning of Section 20 (1) No.4 Income Tax Act and not separately as commercial income or income from employment.
The cabinet has adopted a bill to regulate the automatic exchange of bank account and investment income information with the 60 co-signatory states of the “multilateral competent authority agreement on automatic exchange of financial account information”.
The tax court of Muenster decided that the income from a dissolution of two US trusts be taxed as investment income in the hands of the beneficiary, except for income which accrued prior to 9 December 2010 (by protection of legitimate expectations).
The finance ministry has published the text of a treaty signed with Switzerland to ensure German level withholding tax on investment income, whilst protecting those who choose to move their undeclared funds to a third country. Germany continues to broadly accept Swiss banking secrecy.
Certain type of capital investment income may be taxed under the partial income method (so called half-income method) upon application of the taxpayer and is valid for another 4 years following the year in which the application was made. According to the Supreme Tax Court, the specific preconditions laid down in Section 32d (2) Income Tax Act, e.g. for minimum ownership, only have to be met in the first year of application; a failure to meet the requirements in the following four assessment periods is not harmful.
The transfer of shares to German-residents shareholder as part of a US spin-off generally constitutes investment income under Section 20 (1) No. 1 of the Income Tax Act (ITA); Section 20 (1) No. 1 Sentence 3 ITA is to be interpreted in line with EU law, so that companies resident outside the EU may also repay capital contributions on a tax neutral basis, even though they do not maintain a contributions account for tax purposes under Section 27 of the Corporation Tax Act (CTA).
The regional tax court of Rhineland-Palatinate had to decide whether, in the case of a right to choose between two methods of reducing foreign withholding tax, the taxpayer must ensure that foreign taxes are credited in as small an amount as possible. The regional tax court is of the opinion that it is at the discretion of the taxpayer if and how to use the option to which he is entitled and that this does not have an adverse impact on the general possibility of a foreign tax credit against his German income tax liability.
The Supreme Tax Court has held that a tax evader who came forward under an amnesty could not offset a previously unreported capital loss against his income declared in retrospect, as tax had not been evaded on the loss, now statute-barred under normal rules.
The Supreme Tax Court has filed a preliminary question with the ECJ on the calculation of the German income tax attributable to foreign source income as the maximum amount of the foreign tax credit.
