Germany: Court decisions on corporate participations | KPMG | GLOBAL
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Germany: Court decisions on corporate participations, unused losses, deductible expenses

Germany: Court decisions on corporate participations

Courts have issued decisions in cases that concern German taxation of corporations. These cases include:


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  • A judgment from the Court of Justice of the European Union (CJEU) concerning an interpretation of the term “income from debit-claims with participation in profits” and resulting in withholding in Germany under provisions of the income tax treaty between Germany and Austria—the CJEU concluded that the phrase must be interpreted as excluding income that varies only in the event of losses incurred by the debtor, so that there is exclusively taxation in Austria.
  • A referral from the lower tax court of Hamburg, to the federal constitutional court (BVerfG) concerning a question whether § 8c (1) sent. 2 KStG (the corporate income tax law) is constitutional—that is, whether the provision about unused losses of a corporation is is compatible with the general constitutional principle of equality. At issue was whether these losses are forfeited on a pro rata basis when more than 25% and up to 50% of the shares are transferred within five years (a “detrimental change in ownership”).
  • A federal tax court (BFH) decision denying the transfer of certain reserves to a foreign permanent establishment (PE) within the European Union—the taxpayer transferred a reserve from the disposal of real property created in prior years to real property in Hungary which did not belong to a domestic PE of the taxpayer.
  • The federal tax court (BFH) decision that the general non-deductibility of business expenses of 5% is not only applicable to dividend payments that are under the general exemption for dividends, but also with respect to tax-exempt dividend payments of a foreign company that have already been subject to CFC taxation in Germany.


Read an October 2017 report [PDF 309 KB] prepared by the KPMG member firm in Germany

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