The loss forfeiture rules of Section 8c of the Corporation Tax Act in the version valid for 2014 are not applicable to deductible losses which are allocated to a corporation as partner of a limited partnership pursuant to Section 15a Income Tax Act. With this decision, the Supreme Tax Court contradicts the view of the tax administration.
In a most recent decision, the Supreme Tax Court held that the income tax payable on the compensation for loss of earnings which was subsequently reimbursed by the tortfeasor (injuring party) is subject to income tax in the hands of the injured party.
In a recently published judgment, the Supreme Tax Court decided that the restrictions to offset losses for limited partners are not in breach of constitutional law. The temporal restrictions of Section 15a (1) Income Tax Act are not significant in such a way that they would make the application of the new regulation appear unreasonable, especially since the taxpayer is free to decide for himself whether, when, and to what extent he makes a contribution.
The Supreme Tax Court decided that negative income from the financial year in which a harmful acquisition of shares within the meaning of Section 8c Corporation Tax Act takes place is not completely barred as it still can be offset (carried back) against income from the previous year to the extent the losses were incurred prior to the harmful share transfer.
Section 15b Income Tax Act dealing with the restriction of loss utilization for tax deferral models does not presuppose that an investment is not economically sensible or has not proved particularly successful. The restriction for an offset and deduction of losses from tax deferral models is also constitutional in the case of a so-called definitive loss. This was currently decided by the Supreme Tax Court who hereby confirmed its previous case law on this matter.
In the summary review required during suspension proceedings under Section 69 (3) of the German Tax Court Code, the loss set-off restriction for forward transactions/futures under Section 20 (6) Sentence 5 of the German Income Tax Act (ITA) in the version of the Finance Act 2020 of 21 December 2020 (Federal Law Gazette I 2020, 3096) is incompatible with Article 3 (1) of the German Constitution. This was decided by the Supreme Tax Court in a ruling published on 27 June 2024.
In a recent judgment, the Supreme Tax Court held that the loss offset restrictions of Section 15b of the Income Tax Act would come into effect if the investor did not actively participate in the project. This also applies if the initiator of a tax deferral model, as a founding partner, participates on the same terms as the other investors.
If a partner leaves the partnership, his or her share of the trading loss ceases to exist. A legal successor who assumes the partner’s share cannot utilize this portion of the loss due to a lack of entrepreneurial identity. The reason for the withdrawal is irrelevant, the Supreme Tax Court said in a most recently published decision.
According to a recent judgment of the Supreme Tax Court, Section 2 (4) sentence 3 of the Reorganization Tax Act also prevents offsetting positive income generated during the retroactive period by the transferring legal entity with a loss carry-back of the acquiring legal entity from the following (post-merger) year.
In a request for a preliminary ruling from Sweden regarding the refund of withholding tax, the ECJ is asked whether a recalculation of the loss in accordance with the rules of the source State is required for a loss-making non-resident company receiving dividends to benefit from the same treatment as a loss-making resident company. In his Opinion, the Advocate General considers such requirements to be an unjustified and disproportionate burden on foreign corporate entities and a violation of Article 63 TFEU.
In a recently published judgment, the Supreme Tax Court decided in a case involving the transfer of a limited partnership to the sole remaining limited partner in the legal form of a limited liability company (GmbH) by way of universal succession through accrual, among other things, that the limited partner's allowable loss determined at the time of termination within the meaning of Section 15a (4) of the Income Tax Act can be offset by the limited limited company against its future profits.
Section 20 (4a) sentence 3 of the Income Tax Act (ITA) provides that certain capital-related measures are initially treated as tax neutral. Taxation only occurs at the time of resale of the securities which were delivered in the course of the capital transaction. In a recent judgment, the Supreme Tax Court decided that this does not apply to cases in which neither the issuer nor the holder has the right under the contractual terms to unilaterally tender securities or demand the delivery of securities instead of repayment of the securities in cash.
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.
Losses arising from the inability to trade Russian government bonds and Russian shares cannot be taken into account for income tax purposes in 2022. This was the ruling of the Saxony Finance Court in Leipzig in a recent judgment.
The Düsseldorf Tax Court had to decide whether, during the years in dispute from 2012 to 2014, losses stemming from the lease of an aircraft could still be considered for tax purposes after the aircraft was sold. The key point was the question whether there was an intention to generate income on the part of the plaintiffs. Unlike the tax office, the tax court ruled in the plaintiff's favor.
The review to determine the taxpayer’s intention at making a profit for income to qualify as business income under Section 17 German Income Tax Act must be with regard to the taxpayer's entire shareholding in the corporation. An isolated analysis based on the single business share sold is not possible. In its current ruling, the Supreme Tax Court also comments on the question of abuse of rights with the intention to create tax losses in a case of increased acquisition costs because of a (paid) premium.
As a result of a decision published by the Supreme Tax Court in April 2025, the Federal Ministry of Finance (MoF) has commented on the distinction between the remuneration of a service on the one hand and economic activity on the other in case of deficit-ridden institutions.
In its decision of 22 September 2022, the European Court of Justice upheld the German rule that the final losses of a permanent establishment (PE) located in the United Kingdom are not deductible for the German head office (parent company). This practice is not contrary to the principle of freedom of establishment. There is no obligation under EU law to take such losses into account because Germany as the state of residence has waived its power to tax the profits (and losses) of its UK PE under the UK/German double tax treaty.
If the shareholder's right of membership in a domestic stock corporation (AG) lapses because the AG is dissolved, wound up and deleted from the register as a result of insolvency, the shareholder incurs a taxable loss if he does not receive his contribution back in full or in part.
According to a decision of the Supreme Tax Court published on 21 October 2021, the loss of a silent partner's contribution, which is reflected as a partial write-down for tax purposes, does not fall within the scope of the loss utilisation restriction under Section 2a (1) Sentence 1 No. 5 in conjunction with Sentence 2 Income Tax Act (ITA).
