Tax & Legal

Tax & Legal

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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Transparency Register: registration obligations from 1 October 2017

The Transparency Register – as defined in Section 18 of the Money Laundering Act – is a legally prescribed register, which records beneficial interests in companies, partnerships and foundations, which themselves operate on the financial markets. The register became effective on 1 October 2017. Continue reading

Bundesrat reacts positively to exchange of information for tax-saving schemes

At its sitting on 22 September 2017 the Bundesrat (Federal Council/upper house) expressly welcomed the proposal for an amendment of Council Directive 2011/16/EU on administrative cooperation in the field of taxation to impose a reporting obligation on cross-border schemes. It has long been a demand of the Bundesrat that rules on reporting obligations be introduced. Continue reading

Referral to Federal Constitutional Court: trade tax on the profits arising on the disposal of an interest in a partnership by persons other than individuals.

The First Senate of the Federal Constitutional Court heard arguments on the constitutionality of a provision in the Trade Tax Act, according to which trade tax was levied on the sale of business interests. The case has opened up a question of principle with regard to trade tax. Continue reading

New US tax reform framework released

The Trump Administration and Congressional Republican leaders released on September 27, 2017 a nine-page “unified framework for fixing our broken tax code” (the Framework) that includes specific goals for lower business and individual tax rates. Continue reading

Profit participation rights at fixed rate is interest under German-Austrian tax treaty

In a dispute between Germany and Austria on the right of taxation of payments from registered certificates the ECJ held that such interest should be taxed only in the country of residence of the beneficial owner unless such debt-claims explicitly provide the creditor with a participation in the debtor’s profits. Continue reading