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Tax & Legal

Tax & Legal

Taxation of statutory retirement pensions not unconstitutional – well not yet


Although both of the plaintiffs lost their cases before the Supreme Tax Court, the current ruling has far-reaching consequences for future generations of pensioners, such as those now in their mid-40s. In both of its decisions, the court provided concrete guidelines on how double taxation of pensions must be avoided in the future. 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

Sky subscription for German football league games may constitute income-generating costs


The Supreme Tax Court has ruled the expenses of a football trainer for a Sky subscription to German football league (“Bundes League”) games may be treated as tax-deductible expenses from self-employed income. The appellant was a full-time trainer of goal keepers working in licensed football. Continue reading

Double tax treaties: recognition of losses from a Belgian permanent establishment.


Section 50d (9) Income Tax Act (ITA) excludes a tax exemption in Germany under a double tax treaty where, inter alia, the income is not taxed in the other treaty state. In a decision of the Supreme Tax Court published on 19 December 2018, the Court held that the term “income” in this context applied to both positive and negative income. Thus, provided that the other conditions set out in Section 50d (9) have been met, losses, which were originally excluded as tax-free treaty income, could, be deducted from domestic taxable income, regardless of the treaty. Continue reading

Federal Finance Ministry circular on the tax treatment of salaries for tax treaty purposes is updated.


The Federal Finance Ministry circular of 12 November 2014 on the taxation of salaries for tax treaty purposes has been revised by a committee made up of from both the Federal and the States’ governments. The new version recognises OECD developments as well as recent case law and relevant changes in the legislation. Continue reading

Principle of deemed single uniform compensation


Where an employer contractually obliges himself to make several payments to an employee in connection with a termination of employment, the payments will only be considered as a single uniform compensation payment if there is clear evidence that all instalments were paid “as compensation for lost income or expected loss of income”. Continue reading

Limited taxpayers: withholding tax on cross-border licensing of software


At the beginning of November 2017 the Federal Finance Ministry published the long-awaited circular on its intended application of the rules (Section 50a Income Tax Act)applying to limited taxpayers and withholding tax on cross-border licensing of software and databanks. Continue reading

Commercial transactions between friends; recognition of losses


On 8 November 2017 the Supreme Tax Court published a decision made on 9 May 2017 on a case involving a gratuitous share transfer between friends, where the transferor had significant acquisition costs. The Court held that the presumption of a commercial transaction is not rebutted purely because a friendship exists between the contracting parties. Continue reading