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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

Real Estate Transfer Tax Act: changes planned to the treatment of “share deals”


The Federal Ministry of Finance is planning to introduce a bill based on the proposals made by the Finance Ministers’ Conference in November 2018 in relation to the Real Estate Transfer Act (RETT Act). It is currently envisaged that the changes, which are likely to be discussed in the Cabinet at the end of April 2019, should be included in the Finance Act 2019. Continue reading

Input VAT claims and Brexit


Prior to the announcement on 21 March 2019 that Brexit may be postponed until either 12 April 2019, 22 May 2019 or possibly later, the British tax and customs authorities (HMRC) issued guidance on 18 March 2019 on the changes to VAT IT systems in the event of the United Kingdom leaving the EU on 29 March 2019 without a deal. 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

Draft discussion document for the promotion of R&D


In a draft discussion document the Federal Ministry of Finance has revealed plans for an annual research and development (R&D) grant costing a total of € 1.25 billion per annum. The plans provides for an initial duration of four years, after which an evaluation will follow. The Finance Ministry is thus currently planning total subsidy to the value of € 5 billion. According to the draft, the federal and state governments should each pay half of this amount. Continue reading

ECJ: Passive income attribution from controlled companies resident in third countries


The European Court of Justice has held that the German provision for the taxation of  controlled company income from invested capital from outside the EU might fall under the “grandfather” clause of Art 64 TFEU, provided the German legislation has remained substantially unchanged since that date. It is now for the Supreme Tax Court to decide finally whether this is the case. 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