In a recently published decision, the Supreme Tax Court clarified that foundations with legal capacity are not subject to trade tax per se. The decisive factor is whether economic business operations within the meaning of the Trade Tax Act are carried out.
The Supreme Tax Court has held that there is no constitutional objection to the partial disallowance of rental costs for trade tax, even if the tenant has sublet the premises.
In a recent judgment, the Supreme Tax Court decided, inter alia, that interest on deposit liabilities in the retrocession business of a reinsurance company is subject to the trade tax addback pursuant to Section 8 no. 1 letter a Trade Tax Act. There is no general exception for insurance and reinsurance companies similar to the so-called trade tax banking privilege.
In a most recent decision, the Supreme Tax Court held that payments for granting cable retransmission rights may be added back for trade tax purposes pursuant to Section 8 No. 1 (f) of the German Trade Tax Act.
The ECJ has upheld the German disallowance of one-half of the long-term interest expense for trade tax as not conflicting with the Interest and Royalties Directive.
The Berlin-Brandenburg Tax Court decided that the relevant double tax agreement with the US requires US withholding tax on dividends to be credited against German trade tax even though the Trade Tax Act does not contain any provisions equivalent to the tax credit rules for corporation tax. It is interesting to note that the Hesse Tax Court had already decided likewise in a decision from February 2021.
Under the extended trade tax deduction, rental income derived by entities whose activities are limited to the administration of their own real property is deductible from the trading income subject to trade tax. The Grand Senate of the Supreme Tax Court held that this trade tax deduction is also available for a commercial GmbH & Co. KG with respect to its interest in a pure asset-management civil law partnership.
A limited liability company (GmbH) that holds training classes at an education institute through its sole shareholder-managing director is not a vocational education organization qualifying for trade tax exemption under Section 3 No. 13 Trade Tax Act.
The Constitutional Court has refused to try a case against the trade tax interest add-back for want of a detailed explanation of its complaint by the referring court.
The Supreme Tax Court has held that the foreign passive income attributed to a domestic parent is to be seen as stemming from a foreign business establishment and is therefore exempt from trade tax.
An ECJ advocated general has suggested the court rule that the German trade tax interest disallowance is not a "withholding tax" banned by the Interest and Royalties Directive.
The Constitutional Court has rejected a claim that the trade tax charge on companies is unconstitutional in that companies are treated differently from natural persons.
Two decisions of the Baden-Württemberg Tax Court have been published in connection with the attribution of foreign passive income for trade tax purposes. In these decisions the Court also raises doubts as to whether the add-back of this type of foreign income is compatible with EU law.
The Supreme Tax Court has upheld the German disallowance of one-half of the long-term interest expense for trade tax as not conflicting with the Interest and Royalties Directive and not infringing the German/Dutch tax treaty prohibition on discrimination.
The Supreme Tax Court has held the 80% deduction from income chargeable to trade tax from shipping operations in international waters to be available regardless of a short or long term intention to continue the operation. If, however, the ship had already been sold prior to commissioning, the capital gain is not derived from an international operation and is chargeable to trade tax in full.
The Supreme Tax Court decided that a secondary (ancillary) activity to the holding and management of own property which is not expressly permitted by Section 9 No. 1 Sentence 2 Trade Tax Act (in the case in dispute: keeping classic cars for the purpose of appreciation of value), can also preclude an extended trade tax deduction even if no income is generated.
The Supreme Tax Court has held on a literal interpretation of the statute that an unrealised exchange gain on opting for tonnage tax does not qualify for the trade tax privilege for shipping income when realised.
The Supreme Tax Court has held that restricting a trade tax privilege to domestic units of a tax group does not infringe a group’s freedom of Establishment.
