Tax & Legal

An orchestra musician employed by a public corporation in the Grand Duchy of Luxembourg is an artist within the meaning of Article 16 (1) of the double tax treaty between Germany and Luxembourg. The Supreme Tax Court has recently decided that his salary is taxable in Germany as income from employment with a credit of the tax paid in Luxembourg.

The right to tax carried interest (i.e. the additional share of profits disproportionate to the capital invested) is vested in the country of residence either under Art. 21(1) Double Tax Agreement-USA (“DTA-USA”) (Other Income) or under Art. 13(5) DTA-USA (Capital Gains) if the corresponding income constitutes income from asset management and not income from business activities. In a recent decision, the Schleswig-Holstein Tax Court ruled on the treaty qualification of the carried interest received by a German resident shareholder (the intervenor) of a limited liability company established under the law of the US state of Delaware with its registered office and place of management in the US (the claimant).

In two decisions, the Supreme Tax Court has defined in more detail the requirements for a foreign permanent establishment in cross-border situations under a double tax treaty (DTT). If such a treaty exists, double taxation is usually avoided by exempting the foreign branch income from German tax.

On 8 August 2023, a presidential decree was published, under which the selected provisions of international double tax treaties (DTTs) must be suspended until "the respective foreign states eliminate the violations of legitimate economic and other interests of the Russian Federation."

The German and Swiss tax authorities have concluded a new consultation agreement regarding the group of persons to whom Article 15 paragraph 4 applies to ensure the uniform application and interpretation of Article 15 paragraph 4 of the double tax agreement between Germany and Switzerland (Federal Ministry of Finance, letter dated 25 April 2023).

On 6 July 2022 the Finance Committee of the German Bundestag (whose working scope basically coincides with the responsibilities of the Federal Ministry of Finance) approved specific revisions to the double tax treaties with Mauritius and Mexico.

In a recent ruling, the Münster Tax Court had to decide on the income tax and treaty law treatment of a severance payment received by the plaintiff as a soldier in the British armed forces

The Supreme Tax Court refused to overturn the tax court’s decision to refuse leave to appeal, agreeing with the lower court that a locker can constitute a fixed place of business within the meaning of Article XI Paragraph 1 of the German/British double tax treaty.

The Federal Finance Ministry circular of 12 November 2014 on the taxation of salaries for tax treaty purposes has been revised by a committee made up of from both the Federal and the States’ governments.

On 7 June 2017 Germany together with the representatives of over 60 countries signed the multilateral convention, which should transpose the main recommendations of the G20/OECD Project against Base Erosion and Profit Shifting (BEPS Project) into existing bilateral tax treaties.

The Constitutional Court has held the treaty override provisions of the Income Tax Act making treaty exemption dependent upon proof of taxation or explicit exemption in the other state do not breach the formal provisions of the constitution if they took effect after enactment of the treaty.

The finance ministry has published its model double tax treaty serving as a guideline to negotiators.

The German and Austrian finance ministries have agreed to tax civil service pensions paid to widows as though payment continued to be to the original beneficiary.

A revised double tax treaty has been signed with Luxembourg reflecting the current version of the OECD model.

A revised double tax treaty has been signed with the Netherlands reflecting the current version of the OECD model.

The German and US authorities have agreed to treat employee retirement savings schemes and investment trusts holding pension fund assets as pension funds for the tax treaty exemption of dividend income.

The government has broken with its standing policy of not signing double tax treaties with tax havens with its signature on an OECD model treaty with Liechtenstein.

Germany and Kosovo have agreed to follow the German/Yugoslav double tax treaty in their mutual tax relations.

The Supreme Tax Court has held that the pre-retirement pay of an employee with no further duties remained taxable in Germany as employment income despite his move to France.

The finance ministry has confirmed its interpretation of the Norwegian DTT to the effect that dividends received by a German company on a holding of 25% or more are free of German taxation.