Tax & Legal

The Supreme Tax Court has commented on the requirements for an item of daily use and decided that the profit/loss from the sale of high-priced everyday items is not taxable as capital gain from "private disposals" (Section 23 (1) No. 2 Sentence 2 Income Tax Act).

In a judgment published today the Supreme Tax Court clarified that companies can cover the costs of farewell parties for departing employees without incurring tax disadvantages as long as the event is organized as a company event.

In a decision published in April 2025 the Supreme Tax Court held that the effective day on which the actual activities are carried out by a partnership is relevant to determine the begin of its trade tax liability.

In the case of the partial transfer of individual business assets pursuant to Section 6 (5) Sentence 3 No. 2 Income Tax Act, the taxable profit is not to be determined by adhering to the so-called strict separation theory but rather according to the modified separation theory with proportional allocation of the book value up to the amount of the partial consideration. This was decided by the Supreme Tax Court in a most recently published judgment.

In a recently published decision, the Supreme Tax Court has, in some aspects, facilitated the tax recognition of employee-financed pension commitments for shareholder managing directors of a limited liability company (GmbH) but at the same time it also set some limits.

When testing the arm's length nature of the interest rate on a direct pension commitment financed through deferred compensation in favor of a shareholder-employee, the interest rate agreed for the similar pension promise in favor of an employee who is not a shareholder and who is employed in the same company is not a suitable yardstick, the Supreme Tax Court said in a most recently published decision.

In a most recent judgment, the Supreme Tax Court decided that the obligation to use the special electronic mailbox also applies if a tax advisor who exercises his right to represent himself or represents a relative files a lawsuit before a tax court as a private individual without referring to his accreditation as a tax advisor.

In a most recently published decision, the Supreme Tax Court held that real estate transfer tax falls due on the acquisition by a company of its own shares if this led to a holding of a little over 95% (90%) of the issued share capital in the hands of one of the shareholders.

If a notary fails to comply with his obligation to notify the tax office of legal transactions with relevance to real estate transfer tax within the two-week period as provided for by law he cannot apply for reinstatement into the status quo ante pursuant to Section 110 of the German Tax Code (AO) with respect to the missed notification deadline. This was decided by the Supreme Tax Court in three recently published judgments.

Interest on trade tax refunds pursuant to Section 233a of the General Tax Code (AO) must be recorded as business income when determining taxable income. In a most recently published decision the Supreme Tax Court further stated that the treatment of interest that is not deductible (i. e. added back to income) as interest on arrears pursuant to Section 4 (5b) Income Tax Act versus interest refunds which are subject to income tax does not violate the principle of equality under the Basic Law.

The coronavirus emergency aid (with financial support from the federal government) for the months of April, May, and June 2020 is taxable as business income. According to the decision of the Supreme Tax Court, the original approval notice cannot be amended with retroactive effect if the subsidy had to be repaid later.

If the seller of a property has granted a third party a right of usufruct prior to the conclusion of the purchase agreement, and this right has not yet been entered in the land register at the time of conclusion of the agreement, the transaction is subject to real estate transfer tax. This was decided by the Supreme Tax Court in a most recently published judgment.

The free movement of capital under Article 63 of the Treaty on the Functioning of the European Union is not violated if the tax treatment of a donation to a foundation based in the Swiss Confederation is subject to national requirements that apply in the Member State of the donor. According to the Supreme Tax Court, the national legislature is not obliged to recognize the charitable status under foreign law.

With the extension of the tax return deadlines for the 2019 tax period, the legislator took into account the difficulties caused by the coronavirus pandemic. However, if taxpayers missed these deadlines as well late filing penalties had to be imposed. There was no room to exercise discretion, the Supreme Tax Court said in a most recently published decision.

Recurring remuneration from an employee's mandatory employee profit participation right (PPR) is not generally covered by the provisions of Section 19 (1) sentence 1 no. 1 Income Tax Act (ITA) for income from employment. This was decided by the Supreme Tax Court in a most recently published judgment.

Recurring remuneration from a typical silent partnership between the employee and the employer company is taxable as capital investment income within the meaning of Section 20 (1) No.4 Income Tax Act and not separately as commercial income or income from employment.

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 decided that the taxable benefit from private use of a company car may not be reduced by parking costs borne by the employee. The provision of a parking space or garage free of charge is considered separate to the benefit in kind of using a company car for private trips.

In a recent judgment, the Supreme Tax Court held that the loss offset restrictions of Section 15b of the Income Tax Act would come into effect if the investor did not actively participate in the project. This also applies if the initiator of a tax deferral model, as a founding partner, participates on the same terms as the other investors.

In a recently published decision, the Supreme Tax Court held that an employee, in addition to the deduction of expenses for the rented apartment as double-household relief, can also claim the costs for a parking space as income-related expenses.