German Tax and Legal News

24.08.2010 – German Tax and Legal News

BGH revises position on cash compensations for squeeze-outs

The BGH has ruled on the reference periods for the weighted stock average when determining the amount of cash compensation paid to minority shareholders in a squeeze-out. The court gave up its previous view that the date of the shareholders’ resolution is relevant for calculating the cash compensation and now takes the view that the three months period prior to an announcement of a structural measure is decisive.

24.08.2010 – German Tax and Legal News

Local tax court rules on timing issues for financial integration of controlled entity in German tax group

The local tax court of Saxony has confirmed that the head of a German tax group must continuously hold the majority of the voting rights in the controlled entity for the entire fiscal year of the controlled entity and that the existence of such a financial integration is based on actual facts rather than legal circumstances, which is why it cannot be established in a transaction with retroactive effect for German tax purposes.

24.08.2010 – German Tax and Legal News

BMF withdraws decree on tax treatment of treasury stock / share buy-backs

The BMF has changed its position that a share buy-back should be treated as an acquisition from the perspective of the acquiring company and as a sale from the perspective of the selling shareholder.

24.08.2010 – German Tax and Legal News

Federal Tax Court rules on cross-border loss relief for losses from EU permanent establishments

The Federal Tax Court has ruled on practical issues arising in EU permanent establishment cross-border loss relief cases. The cases involved the questions (i) whether final losses occur upon a forfeiture of tax loss carryforwards under general temporal limitation rules in the PE-state or upon a termination of a PE with not yet exhausted tax loss carryforwards, (ii) in which year a final loss must be recognized in the country of residence and (iii) whether these losses are effective for trade tax purposes.

24.08.2010 – German Tax and Legal News

Local tax court of Cologne rules on procedural aspects of withholding tax refund claims (“Gaz de France”)

In the Gaz de France case, the taxpayer failed to obtain relief from German withholding tax on dividends under the Parent-Subsidiary Directive because a French S.A.S. was not considered to be covered by the Directive. The local tax court of Cologne now has rejected a taxpayer’s claim for a refund of withholding tax based on the fundamental freedoms in the EU Treaty and has held that the Federal Tax Office is not the competent authority to resolve such claims.

24.08.2010 – German Tax and Legal News

Annual Tax Act 2010 may amend exit tax rule for cross-border asset transfers

The latest draft of the Annual Tax Act 2010 contains an amendment to the existing exit taxation rules concerning the transfer of assets to foreign permanent establishments. Based on the draft law, the transfer of assets held by a German corporation or partnership to a foreign permanent establishment, the transfer of a business abroad and cross-border migrations of corporations should trigger exit taxation on the full built-in gains.

27.07.2010 – German Tax and Legal News

Buildings not constructed on own land must be depreciated like own buildings

The owner of a building that is not constructed on its own land is not allowed to take the shorter period of the right to use the land into account in computing depreciation. Instead, the standard depreciation periods of 33.33 or 50 years apply.

27.07.2010 – German Tax and Legal News

Federal Fiscal Court rules on treatment of lease guarantee in connection with property acquisition

If a seller of leased property guarantees certain lease income in connection with an existing lease and, if the amount guaranteed under the lease guarantee is not met by payments under the existing lease agreement, the compensation paid under the lease guarantee reduces the purchase price of the property.

27.07.2010 – German Tax and Legal News

BFH comments on definition of “independent business division” for reorganization purposes

The BFH has upheld its past case law that a tax neutral demerger is possible only if all business assets necessary to carry out the demerged business are transferred to the receiving entity. The BFH overturned a previous taxpayer friendly decision of the local tax court of Saxony.

27.07.2010 – German Tax and Legal News

Tax court of Düsseldorf confirms restrictions on interest deductibility for partnerships in corporate groups

In two published decisions, the local tax court of Düsseldorf has confirmed that the German rule which limits deductibility of interest expense at the partnership level based on the presumption that the partner has made “excess withdrawals” from the partnership also applies to partnerships in corporate groups.

27.07.2010 – German Tax and Legal News

BMF issues more guidance on tax treatment of certain cost items for production costs

The BMF has published guidance on the German GAAP and tax treatment of certain cost items for purposes of the production costs of assets, which temporarily eases the effects of official guidance published in March.

27.07.2010 – German Tax and Legal News

New decision on cross-border loss relief between corporations

The local tax court of Rheinland-Pfalz has ruled on the second case of cross-border loss utilization between corporations. As in the case decided by the tax court of Lower Saxony, the court rejected the claim for a loss deduction. Both cases are now pending before the Federal Tax Court.

26.07.2010 – German Tax and Legal News

German lower tax court rules on withholding tax on royalties in an EC law context

In a recently published decision the tax court of Lower Saxony ruled that an outgoing royalty was not an expense which was directly linked to German royalty income so that it would not have to be considered when levying withholding tax.

01.07.2010 – German Tax and Legal News

New guidance issued on anti-treaty shopping rule

The German Ministry of Finance has published additional guidance on the German anti-treaty shopping rule which largely confirms existing guidance but also includes some taxpayer-friendly amendments.

24.06.2010 – German Tax and Legal News

Federal Fiscal Court confirms residence country taxation of interest income from rental profits in cross-border situations

Following several decisions by the local tax courts, the Federal Fiscal Court has confirmed that a deemed trading partnership will not be regarded as a business for tax treaty purposes. Therefore, interest income is taxable in the country where the recipient is resident even if it arises from a cash surplus as a result of property leasing activities in the other state.

23.06.2010 – German Tax and Legal News

Court queries constitutionality of limited offset of loss carryforwards (“minimum taxation”)

The tax court of Nuremberg has questioned whether the German minimum tax rules are in line with the Constitution in cases where the losses are subsequently eliminated under the change-in-ownership rule or the rules on reorganizations.

23.06.2010 – German Tax and Legal News

Germany referred to ECJ for discriminatory dividend taxation to nonresident pension institutions

The European Commission has decided to refer Germany to the ECJ with respect to the tax treatment of dividends paid to nonresident pension institutions.

23.06.2010 – German Tax and Legal News

BFH rules on forfeiture of trade tax loss carryforwards in multiple tier partnerships

The BFH has held that in a two tier partnership structure, the collapse of the upper tier partnership into its partner because of a merger of its partners, constitutes a harmful change in the partners of the lower tier partnership and therefore led to an elimination of the losses in the lower tier partnership.

23.06.2010 – German Tax and Legal News

Lower tax court publishes first decision on interest deduction limitation rule

The tax court of Lower Saxony has ruled on the calculation of the harmful shareholder financing threshold under the equity ratio comparison test under the interest deduction limitation rule and questioned whether the tax authorities’ approach is in line with the law.

23.06.2010 – German Tax and Legal News

Recent court decisions on requirements for list of shareholders of GmbH under current law

The German GmbHG requires that a list of shareholders be submitted to the commercial register at the time of incorporation and upon each change in shareholders. German courts have issued several decisions on practical questions relating to the shareholder list.

23.06.2010 – German Tax and Legal News

BFH rules on tax group with trade tax-exempt parent company

The BFH has ruled that the trade tax exemption of the head of a German tax group does not apply to non-exempt income transferred under a profit and loss pooling agreement from one of its subsidiaries.

28.05.2010 – German Tax and Legal News

Finance Court of Baden-Württemberg: Trade tax privilege for real estate holding companies not available if property not owned at the beginning of the calendar year

The Finance Court has ruled that the extended trade tax deduction is restricted to income arising from property that is owned at the beginning of the calendar year for which the trade tax is assessed.

28.05.2010 – German Tax and Legal News

Finance Court of Düsseldorf: Real Estate Transfer Tax on unification of shares in fiscal unity must be capitalized as additional cost for shares

The Finance Court has confirmed the position of the tax authorities, holding that RETT triggered on the unification of shares in a real estate owning company in the hands of a fiscal unity for RETT purposes will be treated as an additional acquisition cost for the shares, although this position has been challenged in the prevailing tax technical literature.

26.05.2010 – German Tax and Legal News

BMF issues decree on treatment of partnerships under tax treaties

The BMF has published guidance on the tax treatment of partnerships under tax treaties. The guidance summarizes the current positions of the tax authorities, but also includes some controversial positions that may give rise to litigation.

26.05.2010 – German Tax and Legal News

VAT refund claims in Germany for EU and non-EU entrepreneurs

Non-EU businesses that are not registered for VAT purposes in Germany and that intend to reclaim VAT incurred in Germany in 2009 need to do so by 30 June 2010. For EU businesses, the deadline is 30 September 2010.

26.05.2010 – German Tax and Legal News

Financial restructuring privilege under change-in-ownership rules suspended

The German BMF has responded to the European Commission’s state aid investigations into the financial restructuring privilege under the German change-in-ownership rule. According to new guidance, the application of the financial restructuring privilege will be suspended until the state aid investigations are completed.

26.05.2010 – German Tax and Legal News

Local tax court of Munich rules on tax consequences of employee stock option plan

The local tax court of Munich has confirmed the tax authorities’ view that a German company that grants stock options to its employees should not incur tax deductible personnel expenses if the awards are satisfied by newly issued shares.

26.05.2010 – German Tax and Legal News

Local tax court rules on failure to comply with tax authorities’ information request during a tax audit

The local tax court of Schleswig-Holstein has held, in proceedings for the suspension of execution, that a penalty introduced along with the rules for the transfer of electronic bookkeeping abroad could be applied in a regular tax audit and other cases if the taxpayer fails to timely submit documentation requested by the tax authorities.

26.05.2010 – German Tax and Legal News

District Court raises doubts on validity of notarial recordings of transfers of GmbH shares in Switzerland

A decision of the district court of Frankfurt a.M. has resulted in increased uncertainties as to whether notarial recordings outside of Germany would be legally valid after the revision of the German Limited Liability Companies Act in November 2008.

26.05.2010 – German Tax and Legal News

BMF issues guidance on reporting requirements on foreign investments

The BMF has published guidance on the information requirements imposed by German tax law on resident taxpayers that invest in nonresident businesses, partnerships or corporations.

28.04.2010 – German Tax and Legal News

Guidance issued on relationship between German GAAP and German tax accounting under accounting reform

The Federal Ministry of Finance has published official guidance on certain changes to the income tax rules following the German accounting reform, which may impact the recording and valuation of assets and liabilities for German tax and GAAP purposes.

28.04.2010 – German Tax and Legal News

Federal Tax Court confirms strict formal requirements for profit and loss pooling agreements

The Federal Tax Court has overruled a decision of the local tax court of Cologne relating to the contents of a profit and loss pooling agreement.

28.04.2010 – German Tax and Legal News

Federal Tax Court rules on trade tax liability of German KG with one partner for income tax purposes

The Federal Tax Court has confirmed that in a specific trust situation, a German KG with just one partner should not be subject to trade tax and rejected the tax authorities’ guidance dating back to 2005. The decision also opens up other tax planning opportunities.

28.04.2010 – German Tax and Legal News

Local tax court rules on debt restructuring

The local tax court of Munich has rejected the tax authorities’ view that (tax neutral) cash round tripping in repayment of related party loans to avoid over-indebtedness/insolvency should be reclassified as a waiver of the receivable based on the general anti-abuse rule.

28.04.2010 – German Tax and Legal News

Act implementing tax-related EU Guidelines published

The new Act for the Implementation of Tax-Related EU Guidelines and for the Amendment of Other Tax Provisions makes changes in all areas of tax law, the most important of which for corporate taxpayers is an amendment to the rules regarding the relocation of functions.

28.04.2010 – German Tax and Legal News

BMF publishes draft for an Annual Tax Act 2010

The Federal Ministry of Finance has published a draft Annual Tax Act 2010. The most important changes for corporate taxpayers relate to a relaxation of the rules regarding the transfer of the IT environment for electronic bookkeeping abroad and a further restriction of the German CFC rules.

28.04.2010 – German Tax and Legal News

Local tax court rules dividends exempt from German trade tax if treaty provides exemption

The local tax court of Düsseldorf has held that dividends may be exempt from trade tax based on a participation exemption provision in a tax treaty even if the requirements for granting the participation exemption under the German Trade Tax Act are not met.

28.04.2010 – German Tax and Legal News

Draft bill on reform of German Reorganization Act presented

The Ministry of Justice has published a draft bill for an amendment to the Reorganization Act, which would facilitate mergers and divisions of corporations.

31.03.2010 – German Tax and Legal News

Determination of active property dealing activities when sale is result of pressure from financing bank

The Federal Fiscal Court has ruled that personal or financial reasons for a sale of property are irrelevant in determining whether the property should be considered part of an active property dealing business or as passive property management. This rule should apply even where the sale is the result of economic constraints, such as pressure from the financing bank or a threat of compulsory measures.

31.03.2010 – German Tax and Legal News

Input VAT deduction on services received by foreign SPVs with Germany property could be questioned

Foreign SPVs carrying out business activities in other EC Member States (e.g. property owning companies with immovable property located in Germany) often do not have a VAT ID in their country of residence, which is a requirement as from 2010 to provide VAT-exempt services. Therefore, the service provider likely will charge VAT, which may not be creditable by the SPVs, if no VAT ID of the country of residence can be provided.

31.03.2010 – German Tax and Legal News

Finance Court of Schleswig-Holstein: Taxation of interest income from rental profits in cross-border situations

In line with several local tax court decisions, the Finance Court ruled that a deemed trading partnership will not be regarded as a business for tax treaty purposes. Therefore, interest income is taxable in the state of residence of the taxpayer even if it arises from a cash surplus as a result of property leasing activities in the other state. The decision could affect foreign investments in German real estate.

23.03.2010 – German Tax and Legal News

European Commission opens formal investigation on relief from change in ownership rule for ailing companies under state aid rules

State aid: European Commission opens in-depth investigation into the German relief clause from the change in ownership rule that preserves tax loss carryforwards of companies in a restructuring process under certain conditions ("Sanierungsklausel").

23.03.2010 – German Tax and Legal News

European Commission formally requests that Germany amend its anti-abuse provision on withholding tax relief

The European Commission has formally requested Germany to change its anti-abuse provision on withholding tax relief because of the unreasonable requirements for providing evidence of non-abusive structures.

23.03.2010 – German Tax and Legal News

Local tax court of Düsseldorf rules on income allocation of a partnership

The sale of a partnership which served as the head of a German fiscal unity during a financial year results in the need to allocate the annual results of the partnership, together with profits or losses transferred from a controlled subsidiary, to the seller and the buyer. The tax court confirmed that the allocation must be based on interim accounts as of the change in ownership, such that the result of the controlled subsidiaries is effectively apportioned between seller and buyer on a pro rata basis.

23.03.2010 – German Tax and Legal News

No permanent visa required for non-EU managing directors

Since the modernization of the German Act on Limited Liability Companies, a non-EU managing director of a German GmbH does not need a permanent entry permit.

23.03.2010 – German Tax and Legal News

New case law on cross-border loss relief within groups under EC freedom of establishment

The European Court of Justice has ruled that the Netherlands generally is not required to allow foreign subsidiaries to be included in a Dutch fiscal unity. In a similar context, the local tax court of Lower Saxony has held that the recognition of final losses of a foreign subsidiary in Germany requires a contractual obligation of the parent company to offset the losses of the subsidiary for a period of at least five years.

25.02.2010 – German Tax and Legal News

Lower Finance Court of Münster: Withholding tax obligation for payments on profit-participating loans

Withholding tax has become an important issue for foreign investors due to the strict substance requirements for exemption and relief applicable since 2007. The Lower Court of Munster has ruled on the distinction between fixed-interest bearing loans and profit-participating loans -- only the latter are subject to withholding tax under German domestic law.

24.02.2010 – German Tax and Legal News

Overview of major amendments in German civil law

This article summarizes recent major amendments in German law.

24.02.2010 – German Tax and Legal News

Cross-sales of shares may qualify as abuse

Local tax court rules that the general anti-abuse provision prevents a taxpayer from realizing a tax deductible loss in a cross-sale of shares before a law change.

24.02.2010 – German Tax and Legal News

Local tax court rules on when final PE losses become tax effective at level of head office

Contrary to the tax court of Düsseldorf, the tax court of Hamburg ruled that final PE losses should be considered in the tax year in which they were incurred (rather than in the tax year in which they became final).

24.02.2010 – German Tax and Legal News

Local tax court rules on VAT on transaction cost

A local tax court held that intermediary services for the sale of shares, which also contained elements of consultancy, should be considered a single intermediary service because the consultancy services only constituted a means to provide the financial intermediary service due.

24.02.2010 – German Tax and Legal News

Sachsen Anhalt increases RETT rate

The federal state of Sachsen Anhalt will increase its real estate transfer tax rate to 4.5% as from 1 March 2010.

24.02.2010 – German Tax and Legal News

BFH rules on tax treatment of accruals for contingent losses transferred in asset deal

Accruals for contingent losses that are transferred from the seller to the acquirer in the course of an asset deal may be shown in the tax balance sheet of the acquirer as an accrual for uncertain liabilities.

24.02.2010 – German Tax and Legal News

BMF provides additional guidance on electronic transmission of financial statements to the tax authorities

Financial statements for fiscal years starting after 31 December 2010 must be submitted electronically using the XBRL-standard.

24.02.2010 – German Tax and Legal News

Tax court case on maximum amount for tax authority fee for tax ruling

A new case before a local tax court concerns the fee charged for a tax ruling – affected taxpayers should consider appealing maximum fee assessments.

24.02.2010 – German Tax and Legal News

Law on Business Relocation still/again under discussion

The German rules on a relocation of functions are currently under review for potential amendments to the transfer package approach.

27.01.2010 – German Tax and Legal News

Documentation of extraordinary transactions

27.01.2010 – German Tax and Legal News

31 May deadline to report shareholder status after tax-neutral contributions

27.01.2010 – German Tax and Legal News

Filing deadlines for 2009 tax returns

27.01.2010 – German Tax and Legal News

BFH rules on transfer of trade tax liabilities in spin-off

27.01.2010 – German Tax and Legal News

BFH rules on discounting of shareholder loans

27.01.2010 – German Tax and Legal News

Tax court of Munich rules on tax treatment of payments to partners of a partnership

27.01.2010 – German Tax and Legal News

Local tax court rules on when final PE losses become tax effective at level of head office

27.01.2010 – German Tax and Legal News

No changes to existing PLPAs required because of changes under Accounting Reform

27.01.2010 – German Tax and Legal News

Government decides not to issue blacklist of non-cooperative jurisdictions

13.01.2010 – German Tax and Legal News

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12.01.2010 – German Tax and Legal News

Capitalization of maintenance costs

The Federal Fiscal Court held on 25 August 2009 that regular maintenance costs arising as a result of a uniform maintenance or refurbishment measure need to be included in the 15% threshold and consequently need to be capitalized as additional acquisition costs if the threshold is exceeded.

12.01.2010 – German Tax and Legal News

BMF issues decree on interpretation of Investment Tax Act

The Federal Ministry of Finance (BMF) issued a long-awaited decree on 8 August 2009 on its interpretation of the Investment Tax Act (Investmentsteuergesetz, GITA). The decree contains several new interpretations, requirements and simplifications for taxpayers falling with the scope of the GITA.

12.01.2010 – German Tax and Legal News

Lower court of Düsseldorf rules on German capital gains taxation of U.K. real estate held by German resident taxpayer

12.01.2010 – German Tax and Legal News

New group exemption for Real Estate Transfer Tax purposes

22.12.2009 – German Tax and Legal News

Upper House of Parliament passes law to accelerate economic growth

09.12.2009 – German Tax and Legal News

BFH rules on VAT treatment of security collaterals

09.12.2009 – German Tax and Legal News

Solidarity surcharge violates constitutional law according to tax court

09.12.2009 – German Tax and Legal News

Draft bill on Adoption of EU Directives and other Regulations

09.12.2009 – German Tax and Legal News

Draft bill on Law to Accelerate Economic Growth

The German Lower House approved the draft Law to Accelerate Economic Growth on 4 December 2009 with some limited amendments to the previous draft.

09.12.2009 – German Tax and Legal News

Münster tax authorities publish further guidance on tax-effective write-downs of shareholder loans

09.12.2009 – German Tax and Legal News

BFH rules on transfer of beneficial ownership when selling partnership interest under a condition precedent

09.12.2009 – German Tax and Legal News

Update on Act to Combat Tax Evasion

09.12.2009 – German Tax and Legal News

Local tax court rules on transfer of treasury stock

09.12.2009 – German Tax and Legal News

BFH refers case regarding trade tax add-back for long term interest expense to ECJ

10.11.2009 – German Tax and Legal News

Draft law proposes reliefs for business taxation

The coalition agreement signed by the new German government on 26 October 2009 contains several business tax reliefs that are intended to apply as from 1 January 2010. The short-term measures mentioned in this agreement have now been clarified in a draft law (“Proposal for a law to accelerate economic growth”).

27.10.2009 – German Tax and Legal News

New German government puts tax reform on political agenda

After the federal elections on 27 September 2009, the new German conservative/liberal coalition that will govern during the next four years published on 24 October 2009 its draft coalition agreement which is to be signed on 26 October 2009. The agreement, which describes the government’s policy goals and how it intends to achieve those goals, includes some details on planned tax changes, which are likely to affect many taxpayers.

20.10.2009 – German Tax and Legal News

Federal Tax Court confirms that transfer of leased building results in transfer of going concern, even if only part of building leased at time of transfer

20.10.2009 – German Tax and Legal News

Fair value depreciation in case of intended sale of real estate

20.10.2009 – German Tax and Legal News

Tax fraud where declaration for real estate transfer tax not provided

20.10.2009 – German Tax and Legal News

Tax authorities accept that delivery of electricity is part of (VAT-exempt) long-term lease

20.10.2009 – German Tax and Legal News

Federal Tax Court rules on evidence of active trade / business