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Tax & Legal

Tax & Legal

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 (“EStDV”) 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

Taxation of employment income of executive directors and cross-border commuters


In two cases the Supreme Tax Court answered questions raised on the calculation of the “stay away” days (non-return days) of cross-border commuters when returning to their domestic residence from a third-country business trip and of the allocation of  the right of taxation of the employment income of executive directors under the German / Swiss tax treaty. Continue reading

Tax loss of value of shares following the opening of insolvency proceedings


If the shareholder’s right of membership in a domestic stock corporation (AG) lapses because the AG is dissolved, wound up and deleted from the register as a result of insolvency, the shareholder incurs a taxable loss if he does not receive his contribution back in full or in part. If such shares are deleted from the shareholder’s securities account by the custodian bank before the AG is removed from the register, the loss will be considered to arise at the time of the deletion by the custodian bank. However, a loss cannot already be assumed to have arisen at the point when a distribution of assets can no longer be objectively expected as part of the final distribution of the assets of the AG or when the listing of the shares on the stock exchange is discontinued or their listing is revoked.  This was the judgment (VIII R 20/18) of the Supreme Tax Court on November 17 2020 and published on 11 March 2021. Continue reading

Medical telephone consultations through „health coaches” exempt from VAT


Telephone advisory services provided by a company on behalf of state health insurance funds through so-called “health coaches” may be exempt from VAT under Article 132 (1) of the VAT Directive as “medical treatment in the field of human medicine”, if the consultations have a therapeutic purpose. This was the conclusion of the ECJ following on a request for a preliminary ruling brought by the Supreme Tax Court. The latter has now issued its subsequent (follow-up) decision and referred the case back to the Lower Tax Court for further fact finding. Continue reading

No option for full tax assessment by U.S. citizen living in the EU


According to a judgment of the Supreme Tax Court, a U.S. citizen with limited tax liability in Germany is not entitled to the right of full tax assessment for income from employment even if he lives in an EU or EEA state (here: the Netherlands). The non-discrimination clause in Article 24 of the German/US double tax treaty does not give rise to a claim to equal treatment with a German national with limited tax liability. Continue reading

RETT: Change of shareholders in real estate partnership


The Supreme Tax Court has granted a taxpayer’s appeal against a real estate transfer tax assessment on the grounds that an indirect change in the shareholdings in the members of a real estate partnership was less than a complete change of interest in the partnership. With its decision the court has confirmed its case law regarding share transactions made prior to the enactment of the Tax Amendment Act 2015. Continue reading