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Tax & Legal

Deductibility of double-household expenses incurred in advance


Expenses for an apartment are only deductible as double-household expenses incurred in advance if the taxpayer has made a conclusive decision to use the apartment in the future as part of a double-household deductible for tax purposes. Whether this is the case must be decided through an overall assessment of the objective circumstances of the individual case. Continue reading

Tax exemption for group restructurings under Section 6a Real Estate Transfer Act: Supreme Tax Court applies a broad interpretation.


The tax exemption from real estate transfer tax (RETT) in the event of restructuring within a group under Section 6a of the Real Estate Transfer Tax Act (RETTA) does not constitute State Aid prohibited by EU law. It can also apply to cases where a dependent company is merged with a controlling company. This was decided by the Supreme Tax Court in its ruling of 22 August 2019 – II R 18/19, published on 13 February 2020.  Continue reading

Supreme Tax Court discontinues proceedings with regard to the referral to the European Court of Justice on the State Aid character of tax privilege for public undertakings


The Supreme Tax Court had asked (decision of 13.03.2019 – I R 18/19) the European Court of Justice (ECJ) whether Article 107(1) Treaty on the Functioning of the European Union (TFEU) was to be interpreted as meaning that State Aid existed where, under the rules of a Member State, (permanent) losses – incurred by a company from an economic activity maintained without receiving sufficient remuneration to cover its costs – are in principle to be regarded as hidden dividend distributions and accordingly may not reduce the profit of the company, but, in the case of companies in which the majority of voting rights are held directly or indirectly by legal persons governed by public law, those legal consequences are not to be applied to permanent losses arising if such “public” corporations carry on the activities for reasons of transport, environmental, social, cultural, educational or health policy. Continue reading

Entrepreneurial status of members of the Supervisory Board


Where a member of a supervisory board receives a non-variable fixed salary for his services and as a result does not bear any risks vis-à-vis his remuneration, he is not acting as an entrepreneur. This was decided by the Supreme Tax Court in its ruling of November 27, 2019 – (V R 23/19 / R 62/17), thereby abandoning earlier case law. Continue reading

No correction of incorrect income tax assessment in the event of correct declaration of a capital gain by the taxpayer


The Supreme Tax Court held in its ruling of 10 December 2019 (IX R 23/18) that a final tax assessment can no longer be corrected by the tax office under Section 129 of the German Tax Code (“GTC” – obvious errors while issuing administrative acts) if the incorrect assessment of a capital gain whisch was correctly declared by the taxpayer under 17 of the German Income Tax Act was not based on a mere “mechanical error”. Continue reading

Brexit at Midnight: Prepared for what comes next?


Midnight tonight the United Kingdom of Great Britain and Northern Ireland will leave the EU. From 1 February, a transitional phase until the end of 2020 will begin, which means that for the time being, the UK will remain within the internal market and the customs union. Is your business prepared for what may come? Some many open questions. The free PwC-Brexit Readiness Assessment Application can help. Continue reading

Deduction of input VAT for a home office: Does the requirement to submit the decision to allocate an asset for private or business use by a certain deadline comply with EU law?


The Supreme Tax Court has doubts as to whether EU law precludes national case law which states that the decision to allocate an asset to private or business use must be submitted to the tax office by the end of the statutory period for submission of the annual VAT return. Accordingly, in a ruling of 18 September 2019 ( XI R 3/19 published on 30 January 2020) it has requested clarification from the European Union Court of Justice (ECJ). Continue reading

Real estate transfer tax: cancellation of a real estate transfer agreement


In its decision of 4 November 2009 (II B 48/19), published on 16 January 2020, the Supreme Tax Court held that Section 16(1) No. 2 Real Estate Transfer Act (“RETT Act”) did not provide for a time limit for the cancellation of purchase transactions. The special limitation period set out in Section 16 (4) RETT related to the cancellation of the agreement itself and not to the date on which an application was made to cancel the RETT assessment. Furthermore, in the circumstances, the cancellation was not a “retroactive event” within the meaning of Section 175 (1) Sentence 1 No. 2 of the General Tax Code. Continue reading