Tax & Legal

Tax consultancy expenses incurred in connection with the preparation of the tax return and the determination of the profit from the sale of a shareholding in a corporation are not tax-deductible costs of disposal within the meaning of Section 17(2) sentence 1 of the Income Tax Act.

In a recently published decision, the Supreme Tax Court held that the profit from the sale of a limited partnership share which is proportionally encumbered with an atypical sub-participation is fully subject to trade tax.

The review to determine the taxpayer’s intention at making a profit for income to qualify as business income under Section 17 German Income Tax Act must be with regard to the taxpayer's entire shareholding in the corporation. An isolated analysis based on the single business share sold is not possible. In its current ruling, the Supreme Tax Court also comments on the question of abuse of rights with the intention to create tax losses in a case of increased acquisition costs because of a (paid) premium.

The Supreme Tax Court has held that the tax-free gain on the sale of shares is net of direct costs of sale. The additional disallowance of 5% of the tax-free amount is to cover indirect costs.

The finance ministry has issued a decree to the effect that the sale of shares in a company can be non-VAT-able as the sale of a business, if the subsidiary meets the economic integration qualification for joining a VAT group with the acquirer.

The Supreme Tax Court has held that the capital gain on the sale of shares is the difference between the historical acquisition cost and the net proceeds received.

The Supreme Tax Court has held that the sale of less than 100% of the share capital of a subsidiary cannot rank as the sale of a business. The transaction is a VAT-free sale of shares and the input tax on the associated costs is not deductible.