Tax & Legal

In a ruling from May 2025, the Federal Constitutional Court decided that the lack of a written contract between related German companies is not sufficient ground for refusing the deduction of business expenses. Rather, an overall assessment must be made to determine whether the agreement actually took place, even if made verbally or implied.

In a decision published today the Third Chamber of the First Senate of the Federal Constitutional Court (“FCC”) overturned various tax court decisions concerning the obligation to use the special electronic tax advisor mailbox (known as “beSt”).

In its judgment published today, the Second Senate of the Federal Constitutional Court confirms the solidarity surcharge in its current design and rejects the complaint brought by the six members of the liberal Party FDP.

A constitutional complaint challenging the manner of video coverage of an oral hearing before the Munich Tax Court was not admitted by the Federal Constitutional Court. Specifically, the claim was about the use of only one camera without zoom function in a video hearing.

The Federal Constitutional Court held that § Section 6 (5) Income Tax Act providing for the transfer of business assets at book values to be incompatible with the German Basic Law insofar as it rules out a transfer at book value between partnerships with identical shareholding. This exclusion from the tax privilege is incompatible with the general guarantee of the right to equality and thus not justified.

The Federal Constitutional Court held that the retroactive introduction of Sec. 14 (3) Corporation Tax Act concerning the treatment of over-surrenders arising from periods prior to the membership in an Organschaft (tax consolidation group) to be in part unconstitutional and thus invalid.

The German Federal Constitutional Court has ruled that the transitional provision from the imputation system to the so-called half-income method in the course of the Annual Tax Act 2010 is partially incompatible with the German Basic Law and obliges the legislator to retroactively eliminate the identified constitutional violation by 31 December 2023.

Following a referral from the Federal Constitutional Court, the Supreme Tax Court has again had to rule on the income adjustment pursuant to Section 1 (1) Foreign Taxes Act vis-à-vis the write-down of an unsecured loan receivable issued within a group

In a most recent decision, the Federal Constitutional Court held that the favorable tax treatment of income from trade or business, self-employment, agriculture, and forestry (so called ‘profit income’) versus taxable income computed on a cash-basis (“surplus income”) to be unconstitutional. This privileged tax treatment of income from profits, which only applied for 2007, is considered by the court as unequal and thus not justified.

In a decision published on 26 November 2021, the Federal Constitutional Court (Bundesverfassungsgericht,) declared as inadmissible a referral by the Supreme Tax Court (Bundesfinanzhof) regarding Section 3 of the Solidarity Surcharge Act 1995 as amended on October 15, 2002 (SSA, 1995).

In a decision on two joint cases published today the Constitutional Court decided that interest incurred on late payment of taxes (back taxes) and the interest paid for tax refunds pursuant to Sections 233a and 238(1) sentence 1 of the German Fiscal Code is not in line with the German Constitution insofar as the interest rate is set at 0.5% per month and for interest periods from 1 January 2014.

The German Constitutional Court overturned a 2019 judgment of the Supreme Tax Court regarding the erstwhile change in its case law on the issue of the income correction with respect to an unsecured group loan because the tax court failed to submit the facts of the case to the European Court of Justice (ECJ) for final clarification and thus violated the complainant's right to the lawful judge under Article 101(1) of the Constitutional Statute.

In a decision on 10 April 2018, the German Constitutional Court concluded that the complaint that the trade tax treatment of gains from the disposal of partnership interests was unconstitutional because it contravened the principle of equality was not justified.

On 10 April 2018, the German Constitutional Court pronounced as unconstitutional the provisions on the valuation of property for the purposes of real estate tax and demanded new regulations

The Cologne Tax Court considers the standard actuarial interest rate of 6 % applied for the calculation of pension provisions under Section 6a of the Income Tax Act in 2015 to be unconstitutional. It has suspended the appeal and referred the matter to the Constitutional Court for that Court to consider the constitutionality of the standard rate.

The First Senate of the Federal Constitutional Court heard arguments on the constitutionality of a provision in the Trade Tax Act, according to which trade tax was levied on the sale of business interests. The case has opened up a question of principle with regard to trade tax.