Tax & Legal

The Supreme Tax Court has rejected a tax office attempt to requalify a retirement pension paid to a former partner now living abroad to deferred business income.

According to press reports a new draft bill has been introduced by Work and Pensions Minister Bärbel Bas (SPD) with the aim of easing legal requirements for company pension plans (Second Act for the Promotion of Company Pension Plans).

The ECJ has held that a non-resident taxpayer must be able to deduct an annuity paid in consideration for a business interest on the same lines as a resident.

The act transposing the EU mutual assistance directive on tax collection introduces a number of rotine statutory changes and thus serves as an annual tax act.

In a case decided by the Supreme Tax Court, an application submitted to the Portuguese tax authorities before 1 April 2020 led to a ten-year tax exemption of the pension income for a taxpayer who had permanently moved to Portugal However, in order to prevent a double non-taxation in such cases Germany has agreed a subject-to-tax clause with Portugal if such income is not taxed in Portugal.

Although both of the plaintiffs lost their cases before the Supreme Tax Court, the current ruling has far-reaching consequences for future generations of pensioners, such as those now in their mid-40s. In both of its decisions, the court provided concrete guidelines on how double taxation of pensions must be avoided in the future.

In a recent judgment, the Supreme Tax Court decided that the sale of educational institutions (training faculties) is not a service directly serving the purpose of schooling and education and is therefore not exempt from trade tax.

The Supreme Tax Court has held that the pre-retirement pay of an employee with no further duties remained taxable in Germany as employment income despite his move to France.