Tax & Legal

In a Polish case, the ECJ has commented on the distinction between tax exemptions and state aid and specified under what circumstances tax exemptions may be prohibited by EU law.

The Supreme Tax Court decided that a commercial partnership holding a share in a corporation as its sole activity in order to generate dividend income which is partially tax-exempt in accordance with Section 3 No. 40 Income Tax Act can deduct its ongoing administrative and consolidated group costs only in part because they are economically related to the partially tax-exempt income as defined in Section 3c (2) Sentence 1 Income Tax Act.

In a recent judgement, the Supreme Tax Court decided that the participation threshold specified in Section 8b (4) Sentence 6 of the German Corporation Tax Act (“CTA”) (10 % of the share capital) can also be attained through an acquisition transaction which is economically uniform from the acquirer's perspective in a situation where several sellers are involved in the transaction.

While calculating the participation threshold in Sec. 8b (4) Sentence 1 Corporate Tax Act for portfolio dividends (shareholdings of less than 10%) the general principles of the attribution of assets for tax purposes laid down in Sec. 39 Fiscal Code must be observed. According to a most recent judgment of the Supreme Tax Court the decisive factor is the economic ownership of the shares.

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 has held that the simple transfer of a relief fund’s assets to a company which also assumed the related pension obligations shows that it was not previously assured that the assets would only be used for fund purposes. Accordingly, the tax exemption enjoyed in previous years must be withdrawn in retrospect for all years for which tax claims are not yet statute-barred.