The finance ministry has ruled on a court case holding the increased capital gains scope to be unconstitutional inasfar as the gain could have been realised tax free on promulgation of the new law.
The Regional Tax Court of Hesse held that withholding tax levied in Canada on dividends distributed by a Canadian corporation to a German corporation should be credited against German trade tax. The tax authorities have in the meantime launched an appeal against this judgment and the case is now pending before the Supreme Tax Court for final clarification.
In its judgement of 24 July 2018, published on 30 January 2019, the Supreme Tax Court held that with regard to national provisions with a requirement of a minimum shareholding of at least 10%, the principle of the free movement of capital is not blocked by the principle of freedom of establishment. Whilst the judgement specifically related to a legal provision, which is no longer applicable, it represents a departure by the Supreme Tax Court from its previous view on this issue.
An ECJ advocate general has suggested the court recognise a restriction on the free movement of capital from the differing treatment of the corporation tax underlying domestic and foreign dividends, but hold it to be justified in the interests of maintaining the internationally agreed balance of taxing rights.
On 30 May 2017 the Supreme Tax Court decided to refer to the European Court of Justice (ECJ) the question of whether the real estate transfer tax (RETT) exemption on conversions - in Section 6a Real Estate Transfer Tax Act - constitutes illegal state aid.
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.
The German anti- treaty shopping rule denying full or partial relief from withholding tax, as otherwise prescribed under a double tax treaty or applicable EU directive, is questioned by the Lower Tax Court of Cologne as being in violation of community law. The question has been referred to the ECJ in number of cases.
