Tax & Legal

Tax & Legal

Distributions from Luxembourg investment company (SICAV) exempt from German income tax

Corporations with at least a 25% share in a Soci√©t√© d’investissement √† capital variable (SICAV), a Luxembourg investment company, do not have to pay income tax in Germany on the dividends received from the SICAV in 2010. This also applies if the Luxembourg tax authorities ‚Äď for whatever reason – did not exercise their right of taxation at source and the distributions hence remained untaxed. Continue reading

Sale of property after gratuitous transfer to children no abuse

If the taxpayer has arranged for the sale of a property to a third party, there is generally no abuse of tax law (abuse of legal forms) if the property was initially transferred to the children free of charge and subsequently sold by the children to the ultimate buyer. According to the decision of the Supreme Tax Court the capital gain is subject to income tax in the hands of the children based on their individual income tax situation. Continue reading

British university college recognized as charitable foundation

An ancient english university college may meet the requirements of a charitable foundation under German law and be exempt from corporate income tax because of its non-profit status. In its decision the Supreme Tax Court also found that the legal structure of the college is equivalent to that of a German foundation within the meaning of Sec. 80 (1) of the German Civil Code. Continue reading

Assessing care and support needs on behalf of Medical Health Service not exempt from VAT

The Supreme Tax Court held that expert reports (appraisals) on the care and support needs of patients in order to determine the extent of their entitlement to medical care on behalf of the Medical Service of the Health Insurance (‚ÄúMDK‚ÄĚ) are not exempt from VAT under national law. A tax exemption under EU law is also not possible according to an earlier ECJ judgement pertaining to the case in dispute. Continue reading

Zero financing does not reduce tax basis for VAT

The payment for a sale of goods is not reduced in case of a 0% financing which was arranged and borne by the seller and which is handled through a bank. The basis of assessment for VAT purposes (tax basis) is still the purchase price agreed with the buyer, even if the invoice states that the seller grants a discount in the amount of the interest. Continue reading

No taxation of bogus income from a Ponzi scheme in the case of tax withheld by fraudster

In a recent ruling, the Supreme Tax Court held that the deemed settlement of final withholding tax under Section 43 (5) Sentence 1, Half-Sentence 1 Income Tax Act (ITA) also applies if the tax has been withheld by the debtor (payer) of the investment income, but not declared and paid over to the tax office. As a result, investment income from a fraudulent pyramid scheme is in principle no longer to be included in the income tax base. Continue reading

Unutilised maintenance expenses deductible under Para. 82b  of the Income Tax Implementation Regulations fully deductible upon death

The Supreme Tax Court decided that where a taxpayer decides to set off major maintenance expenses over a period of several years in accordance with Para. 82b  of the Income Tax Implementation Regulations (‚ÄúEStDV‚ÄĚ) but dies before the full amount has been deducted, that part of the maintenance expenses not yet set off can be deducted as a rental income expense in the year of assessment in which the death occurred. This finding is at variance with Income Tax Guideline No. 21.1 Para. 6 Sentences 2 and 3 Income Tax Guidelines 2012 (EStR 2012) Continue reading

Determination of the addressee of a tax audit notification order

In order to determine the content of an administrative act, the declared intention of the authority must be taken into account and not the literal meaning of the relevant wording; however, a notice clearly addressed to a specific addressee is not open to interpretation in this respect. This was decided by the Supreme Tax Court in a decision published on 8 April 2021. Continue reading