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Tax & Legal

Tax & Legal

Extended trade tax deduction also possible for shareholdings in real estate management companies


Under the extended trade tax deduction, rental income derived by entities whose activities are limited to the administration of their own real property is deductible from the trading income subject to trade tax. The Grand Senate of the Supreme Tax Court held that this trade tax deduction is also available for a commercial GmbH & Co. KG with respect to its interest in a pure asset-management civil law partnership. Continue reading

Non-deductible deemed business expenses not to be derived from merger profits within a tax group


If a corporation is merged into its parent company, which in turn is a controlled company within a corporation tax group (fiscal unity/“Organschaft”) with a corporation as the controlling company (“Organträger”), the Supreme Tax Court has ruled that no flat-rate deemed business expenses are to be added back to profits under Section 8b (3) sentence 1 of the German Corporation Tax Act (CTA) either at the level of the parent company or at the level of the controlled company, where the said non-deductible flat-rate deemed business expenses are derived from a merger gain. Continue reading

Unlimited tax liability with dual residency


The fact that a taxpayer has both a residence in Germany and a residence abroad does not, according to a ruling by the Supreme Tax Court, preclude the existence if an unlimited tax liability even when the foreign residence constitutes the centre of the taxpayer’s vital interests Continue reading

Input tax deduction for advance payment despite non-delivery of ordered goods


The purchaser of thermal power units, which were not delivered due to fraud, shall not be denied the right to deduct input tax from an advance payment if the supply appeared to be certain at the time of payment. In three decisions, the Supreme Tax Court follows a judgment of the European Court of Justice (ECJ), to which it has referred the cases earlier for a preliminary ruling. Continue reading

Free movement of capital in cases of shareholdings of at least 10%


In its judgement of 24 July 2018, published on 30 January 2019, the Supreme Tax Court held that with regard to national provisions with a requirement of a minimum shareholding of at least 10%, the principle of the free movement of capital is not blocked by the principle of freedom of establishment. Whilst the judgement specifically related to a legal provision, which is no longer applicable, it represents a departure by the Supreme Tax Court from its previous view on this issue. Continue reading

Trade tax: Dividend income exemption in case of double residence


According to the Lower Tax Court of Hesse, the dividend income exemption for trade tax on qualifying shareholdings is also available for distributions of companies of foreign legal form – provided the foreign company is comparable to a German corporation, has its place of management and thus a permanent establishment in Germany. Continue reading

Distinction between the interruption of a business and its termination


In its judgment of 18 July 2018 published on 23 July 2019, the Supreme Tax Court decided that, where – looking at the situation from an objective point of view – it would be possible for the taxpayer to continue his business, it should be considered as interrupted rather than terminated. Furthermore, the Court held that the taxpayer could not submit a termination declaration and retain the business infrastructure without making any significant changes. Continue reading