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Tax & Legal

Tax & Legal

Limited taxpayers: withholding tax on cross-border licensing of software


At the beginning of November 2017 the Federal Finance Ministry published the long-awaited circular on its intended application of the rules (Section 50a Income Tax Act)applying to limited taxpayers and withholding tax on cross-border licensing of software and databanks. Continue reading

European Court of Justice: compulsory content of invoices for purpose of deduction of input VAT


On 15 November 2017 the European Court of Justice (ECJ) published its decision in the joined cases of Geissel and Butin ruling that Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (“the VAT Directive”) – Articles 168(a) and 178 (a) together with Article 226(5) – must be interpreted as precluding national legislation, which makes the exercise of the right to deduct input VAT subject to the condition that the address where the issuer of an invoice carries out its economic activity must be indicated on the invoice. Continue reading

Referral to European Court of Justice: Does expatriate exit taxation (Section 6 Foreign Transactions Act) contravene the terms of the Agreement for the Free Movement of Persons?


On 2 November 2017 the Tax Court of Baden-Württemburg released a press bulletin stating that by a notice dated 14 June 2017 (2K 2413/15), it had referred a question to the European Court of Justice (“ECJ”) with regard to Section 6 Foreign Transactions Act (“FTA”) – expatriate exit taxation. The question referred was whether the expatriate exit tax rule under Section 6 FTA contravened the principle of non-discrimination contained in the Agreement for the Free Movement of Persons between the EU and Switzerland. Continue reading

Disposals of shares by limited taxpayers: no add-back of fictitious business expenses without domestic branch


The Supreme Tax Court has ruled that where a limited taxpayer has no permanent establishment (branch/permanent representative) located in Germany, the add-back of fictitious business expenses cannot be applied. Continue reading

Present rules for full forfeiture of loss relief where more than 50% of the shares are transferred also unconstitutional?


On 29 August 2017, the Lower Tax Court of Hamburg referred a further request to the Constitutional Court on the constitutionality of the rules on the full forfeiture of loss relief under Section 8c 2nd Sentence of the Corporation Tax Act, namely where more than 50% of the shares in the loss making company are transferred (second alternative of Sec. 8c Corporation Tax Act). The Lower Tax Court is convinced that this rule is also unconstitutional. Continue reading

VAT – Supply of goods – Finance lease with option to purchase


On 4 October 2017 the European Court of Justice decided that a finance lease with an option to purchase should be qualified as a “supply of goods” where the exercise the option appears to be the only economically rational choice that the lessee could make at the appropriate time. As a result the whole of the VAT becomes due when the object to be leased is handed over. Continue reading

Standard actuarial interest rate for pension provisions of 6 %: unconstitutional?


The Cologne Tax Court considers the standard actuarial interest rate of 6 % applied for the calculation of pension provisions under Section 6a of the Income Tax Act in 2015 to be unconstitutional. It has suspended the appeal and referred the matter to the Constitutional Court for that Court to consider the constitutionality of the standard rate.

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