Tax & Legal

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.

Beneficiaries of a bequest may also claim the lump-sum deduction for estate-related expenses under Section 10 (5) Number 3 Sentence 2 of the Inheritance and Gift Tax Act. According to a most recently published decision of the Supreme Tax Court, this lump-sum allowance must not be reduced if the inheritance received by the other heirs is not subject to German taxation.

The 2027 German Income Tax Reform draft bill ("Einkommensteuerreformgesetz 2027") is aimed at strengthening long-term labour and growth potential, support families, ensure tax fairness, and maintain fiscal stability.

Under Section 13 (1) No. 4c of the Inheritance Tax and Gift Tax Act a family home may be transferred tax-free from a parent to a child upon the parent’s death if the parent lived there personally prior to death, the child moves in immediately after the death, and the living area does not exceed 200 square meters. According to the Supreme Tax Court, even a jointly used garden and associated pathways may be eligible for tax exemption.

To the extent that the minimum tax results in definitive taxation resulting from an ‘inverse accounting effect’, equitable relief measures under Section 163 of the General Tax Code should be given serious consideration, the Supreme Tax Court said in a most recently published decision.

The Supreme Tax Court addressed the VAT treatment of an agreement between a temporary employment agency (the lender) and the client regarding the use of cafeterias by the temporary workers. The agreements - which were set forth in a single uniform contract - do not give rise to taxable services provided for consideration.

In a most recent judgment, the Supreme Tax Court decided that it is not possible to demonstrate that a co-ownership in a plot of land valued at the proven lower fair market value is worth less than the calculated share of the fair market value of the entire plot.

In a recently published ruling, the Supreme Tax Court has referred a question to the Court of Justice of the European Union (CJEU) for a preliminary ruling on whether a remotely controlled technical drying plant located in Germany constitutes a ‘fixed establishment’ within the meaning of the VAT System Directive, where the operator does not employ its own staff and subcontractors are instead working on site.

On 26 May 2026, the Federal Ministry of Finance (MOF) circulated a draft bill for the Finance Act 2026 to industry associations and invited comments by 12 June 2026. The key legislative changes relevant to businesses are summarised below.

In most recent decision, the Supreme Tax Court held that there are no special circumstances that would allow for a retroactive determination of a carryover of donations in the year the donation was made if the correct application was not filed. However, without a separate determination, it is no longer possible to utilize the carryover in the following nine tax assessment years.

In a recently published decision, the Supreme Tax Court decided that an heir’s challenge to the receipt of a tax assessment notice, in his or her capacity as legal successor, can only disrupt the presumption of notification laid down in Section 122 (2) Number 1 of the General Tax Code if there are credible facts that raise specific and well-founded doubts regarding the circumstances of receipt.

In a recently published judgment, the Supreme Tax Court decided that the disallowance to deduct special business expenses under Section 4i Sentence 1 of the German Income Tax Act for partnerships with foreign partners may also apply to cases of Dutch group taxation. Furthermore, it is not only important whether a formal deduction for business expenses is made abroad, but also whether the expenses economically reduce the taxable income abroad.

In a recent judgment, the Supreme Tax Court decided that, for a sub-participation of a share in a corporation - whether in the form of a typical or atypical sub-participation - the tax assessment basis is not to be determined separately and uniformly.

The German Supreme Tax Court has referred a question to the Court of Justice of the European Union (ECJ) concerning the compatibility of German tax law with the EU Merger Directive's tax-neutrality provisions (Article 7(1) of Directive 2009/133/EC). The key issue is whether a Member State can impose a flat-rate non-deductibility rule on business expenses—specifically, a 5% add-back of tax-exempt merger gains resulting from a parent company absorbing its subsidiaries.

According to a decision of the Baden-Württemberg Tax Court, the change of an investment fund’s Luxembourg-based management company is not subject to real estate transfer tax. The transfer of the power of management is not regarded as a taxable transfer of shares because the legal ownership of the shares remains with the investors. The transfer of the power of management thus does not automatically result in a transfer of shares.

IIn a recently published judgment, the Supreme Tax Court held that a company can claim input VAT incurred on consulting and legal fees in connection with pursuing claims for damages (in this case, due to the cancellation of a car toll project) because the claim for compensation arose from a planned commercial activity and thus the underlying costs are, from a VAT point of view, business-related expenses.

In a recently published judgment, the Supreme Tax Court decided that, despite its professional qualification status, paramedic training does not constitute a completion of initial vocational training which is detrimental for granting the child benefit.

On 30 June 2026, the German Central Bank (Deutsche Bundesbank) published a revised edition of its ‘Explanatory Notes on Foreign Trade Reporting’ (the Explanatory Notes). Among other matters, the Explanatory Notes provide further clarification on the reporting requirements for crypto-assets under the German Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung – AWV).

Through targeted surveys of various stakeholders, a public consultation, and later an in-depth interview with some of the affected companies, the European Commission will conduct a comprehensive review of the EU Dual-Use Regulation.

2026年6月24日、欧州委員会は、直接税のオムニバス法案と行政協力指令（DAC）のリキャスト法案からなるTax Simplification Packageを公表しました。本Newsflashでは、両指令案の概要についてご紹介します。