Tax & Legal

The gratuitous transfer of a life insurance policy (transfer of contract) is subject to gift tax at the time of the transfer and must be assessed for tax at its surrender value. Any usufruct retained by the donor does not take effect before the life insurance policy is terminated.

Whether a payment made in connection with the sale of a share in a corporation for the selling shareholder’s continued service as managing director is classified as capital gain under Section 17 Income Tax Act or as income from employment shall be determined based on the economic context and motivation, the Supreme Tax Court said in a most recently published decision.

Costs for legal advice and representation in connection with a partition auction for dissolution of a community of heirs are deductible from the total value of the estate. According to the Supreme Tax Court, this also applies if the community of heirs had already assumed management of the estate’s assets prior to a request for distribution by one of the co-heirs.

In a recent decision concerning the deductibility of expenses for a home office used by a self-employed taxpayer, the Supreme Tax Court clarified the requirements for keeping records of such expenses in terms of content and time. These requirements must be met. Failure to comply generally results in the non-deductibility of the expenses.

With regard to the refund of withholding tax on profit distributions made by a domestic subsidiary to its EU parent company, the Supreme Tax Court decided that these distributions are not excluded from the tax relief under the EU Parent-Subsidiary Directive if they relate to profits that, although distributed after the commencement of the subsidiary’s liquidation, were generated prior to the opening of the liquidation proceedings.

Compensation payments of the (insolvent) debtor to the insolvency estate as a result of the insolvency court’s approval of his self-employment do not constitute business expenses in connection with his income from self-employment, the Supreme Tax Court said in a most recently published decision.

In a recently published decision, the Supreme Tax Court clarified that the interpretation of a “permanent establishment” for business owners and self-employed individuals set forth in Section 4 (5) Sentence 1 No. 6 Income Tax Act and which differs slightly from that in Section 12 of the General Tax Code remains also applicable after the introduction of the new travel expense regulations in 2014 (Act on the Amendment and Simplification of Corporate Taxation and Tax Rules Governing Travel Expenses from 20 February 2013).

In a recent judgment, the Supreme Tax Court decided that the statutory interest levied on late payment or refund of value added tax amounts pursuant to Section 233a of the General Tax Code does not contravene EU law.

The Supreme Tax Court has handed down three judgments addressing the trade tax addback of hotel room rentals to the trading income and explained that not all expenses for renting hotel rooms must be added back. The decisions are significant for companies in the events industry that regularly rent venues and equipment as well as for companies that rent accommodation for their employees working at other locations.

Expenses incurred for business travel by private car are generally considered unreasonable and therefore cannot be fully deducted as income-related expenses if the taxpayer is provided with a company car and would not have incurred any travel expenses had he used it. This is the conclusion of the Supreme Tax Court in a recently published decision.

According to a judgment of the Supreme Tax Court, demonstrating the arrival of goods in another EU member State in the course of an intra-Community supply is not a prerequisite for the protection of legitimate expectations.

In the case of an atypical (non-typical) silent partnership interest in a limited partnership, the tax bases for the “partnership and atypical silent partner” and those for the limited partnership cannot be determined separately and uniformly in a single assessment notice, the Supreme Tax Court said in a most recently published decision.

The principle of altruism (selflessness) in the context of a non-profit organization does not only preclude economic benefits for members in their professional sphere. Economic benefits in the private sphere are also detrimental to a charitable status, the Supreme Tax Court said in a most recently published decision.

In a recently issued judgment, the Supreme Tax Court decided that, upon the opening of insolvency proceedings, the second correction due to uncollectible amounts does not depend on the accuracy of the first correction made in the insolvency process. The correction made at the expense of the insolvency estate is separate from the previous correction.

The application pursuant to Section 21 (2) Sentence 3 of the Reorganization Tax Act to use the book value (acquisition cost) or an intermediate value as the sale price of the shares in the case of an exchange of shares does not require any specific formal requirement. It can also be made expressly or implied.

A signing bonus which is paid by a soccer club to a professional player upon the conclusion of an employment contract may be capitalized as part of the acquisition cost for the exclusive playing rights (i. e., the one-off payment made to a player upon signing a contract with a new club) if the club is required to pay a transfer fee for the player’s change of club.

In a most recent judgment, the Supreme Tax Court decided that an invoice for advance payment entitles the recipient to deduct the underlying input VAT even if it does not include an explicit reference as to the “advance payment” and provided it is apparent that the payment is made for a service still to be supplied.

In a most recently published decision, the Supreme Tax Court held that the first acquisition of a share in a partnership by a party who was not previously a partner under civil law is a taxable event for real estate transfer tax purposes pursuant to Section 1 (2a) of the Real Estate Transfer Tax Act (RETTA).

In a recently published judgment, the Supreme Tax Court decided that the restrictions to offset losses for limited partners are not in breach of constitutional law. The temporal restrictions of Section 15a (1) Income Tax Act are not significant in such a way that they would make the application of the new regulation appear unreasonable, especially since the taxpayer is free to decide for himself whether, when, and to what extent he makes a contribution.

In a recently published judgment, the Supreme Tax Court held that the profit from the sale of the share in a project company in the legal form of a partnership (GmbH & Co. KG) is not included in the trading income of the plaintiff, a limited liability company (GmbH), because the conditions for trade tax liability - namely, the operation of a business as defined in Section 2 (1) Sentence 1 of the Trade Tax Act - were not (yet) met.