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Income tax law contains numerous “loss schedules”, which make offsetting losses against income from other sources difficult and, in extreme cases, block it entirely. The oldest of these relates to commercial animal breeding and husbandry (section 15(4) sentences 1 and 2 of the Income Tax Act [Einkommensteuergesetz–EStG]). After the Federal Constitutional Court [Bundesverfassungsgericht–BVerfG] approved minimum taxation of profit (ruling of 23/7/2025, 2 BvL 19/14), the sixth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH], also held on 11 June 2026 (VI R 29/24) that this restriction was constitutional – including when the losses are finally forfeited as a result of the loss carryforward being stretched across time (permanent loss). The focus of advice thereby finally moves to classification and determination for tax purposes.

Minimum taxation on income taxes limits the direct deduction of loss carryforwards in many cases (section 10d(2) of the Income Tax Act [Einkommensteuergesetz–EStG]; section 8(1) sentence 1 of the Corporate Income Tax Act [Körperschaftsteuergesetz–KStG]; section 10a of the Trade Tax Act [Gewerbesteuergesetz–GewStG] carryforwards are definitely forfeited, this can have permanent effects (known as “definite effects” [“Definitiveffekte”] in German). The Federal Constitutional Court [Bundesverfassungsgericht–BVerfG] ruled on 23 July 2025 that the rules were (2 BvL 19714), but also expressly referred to the equity mechanisms in sections 163 and 227 of the Fiscal Code [Abgabenordnung–AO]. The first chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has now picked this reference up and specified the conditions that apply for equitable relief for balance-sheet effects from reversals of earlier write-downs (I R 20/25, previously I R 59/12).

The Federal Government is pushing forward with the introduction of a tax on sugary drinks. According to the basic information released so far, starting from 2028 the tax is to have an effect as a tool to direct health policy and at the same time generate more income for public budgets or the health system. But the current discussion is already showing that the scope, assessment basis and product categories are politically contentious.

Interest deduction in German income tax law is surrounded by numerous prohibitions and restrictions. Once the business-related nature of the expense has been established (section 4(4) of the Income Tax Act [Einkommensteuergesetz–EStG]), the interest limitation rule (section 4h Income Tax Act, section 8a Corporate Income Tax Act [Körperschaftsteuergesetz–KStG]) and the trade tax add-back under section 8 no. 1 of the Trade Tax Act [Gewerbesteuergesetz–GewStG], among other things, must be observed. There are further restrictions from section 4(4a) of the Income Tax Act for “special situations”. In a cross-border context, the Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled for the first time on the “anti-double-dip” rule contained in section 4i of the Income Tax Act (file ref. IV R 36/23).

For income tax purposes, partnerships are treated as transparent as far as income tax and corporate income tax are concerned. By contrast, they only incur trade tax if there is a trade or business as defined by Income Tax Act [Einkommensteuergesetz–EStG] (section 2(1) sentence 2 of the Trade Tax Act [Gewerbesteuergesetz–GewStG]), but then in its entirety (section 15(3) no. 1 Income Tax Act). This tax is then also owed by the partnership itself (section 5(1) sentence 3 Trade Tax Act). In a cross-border context, double taxation treaties (DTTs) must frequently be included in the considerations, and concerning all types of income tax as well. In the context of the Germany-Switzerland DTT the Federal Fiscal Court [Bundesfinanzhof–BFH] has handed down another decision in the area of shipping (file ref. IV R 32/23).

“Transfer profit” [Übernahmegewinn] is one of the four types of profit concerning which reorganisation tax law provides rules on how they come about and on their income tax treatment. In the case of reorganisations into a partnership, the keyword “elimination of acquisition costs” (section 4(6) sentence 6 of the Reorganisation Tax Act [Umwandlungssteuergesetz–UmwStG]; section 18(2) sentence 1) is frequently discussed under section 4(4) and following of that Act (most recently Federal Fiscal Court [Bundesfinanzhof–BFH] judgement of 28 May 2026, file ref. IV R 3/23). Increasingly, however, doubts are also being raised about the income tax treatment of the takeover profit that arises when corporations are reorganised into other corporations (section 12(2); section 19(1)). The tenth chamber of the Federal Fiscal Court has now expressed doubts with regard to the EU Merger Directive (2009/133/EC; section 1(5) no. 1 of the Reorganisation Tax Act) in an order for reference to the European Court of Justice (Art. 267(3) TFEU; file ref. X R 27/22).

Interest charged on suspended tax liabilities (suspension interest) of 0.5% per month, i.e. 6% per year, might (already) be unconstitutional for interest accrual periods from 2014 to 2018. Münster Fiscal Court reached this conclusion in its decision dated 3 June 2026 (9 V 583/26), thereby granting a stay of enforcement in respect of the interest assessment notices in question. For the period from 2019 to April 2021, the Federal Fiscal Court (BFH) had already expressed serious doubts about the constitutionality of suspension interest in another case (decision of 24 October 2024, VI B 35/24).

The next key deadline for the introduction of e-invoicing is approaching: from 1 January 2027, new electronic invoicing requirements will apply to many businesses. Although e-invoicing has been embedded in German VAT law since 1 January 2025, many businesses are still postponing the practical changes required.

On 12 August 2026, the Federal Cabinet adopted the draft of an Annual Tax Act 2026 [Jahressteuergesetz 2026–JStG 2026]. The legislative procedure is intended to be concluded before the end of the year. What is being implemented is legislative need dictated by technical considerations, in particular adaptations to European Union law and responses to the case law of the Federal Fiscal Court [Bundesfinanzhof–BFH]. One focus lies in income tax law: Of particular practical relevance are the first statutory rules on the allocation of the purchase price for developed properties (section 6f of the draft Income Tax Act [Einkommensteuergesetz–EStG]), the halving of the relevant period for the first place of work [erste Tätigkeitsstätte] and the increase in the exemption threshold for waiving the deduction of tax at source in section 50c of the Income Tax Act. In addition, the ministerial draft [Referentenentwurf] of an “Income Tax Reform Act 2027” [Einkommensteuerreformgesetz 2027–EStRefG 2027] gives rise to a possible change to the income tax rate schedule (section 32a of the Income Tax Act).

Impairment valuation is a frequent point of contention in tax audits. This also applies to write-downs of work in progress, which allow expected future contract losses to be partially recognised on the balance sheet date. In recent years, external factors like disruption to production during the COVID pandemic, increases in material and energy costs and geopolitical disruption to supply chains led to considerable strain in long-term production.

When businesses want to be successful in the long-term, they have to adjust quickly to changing conditions. Under certain circumstances, the German Transformation Tax Act (Umwandlungssteuergesetz) allows businesses to be reorganised without any adverse effect on income tax. Important for tax neutrality is particularly carrying over tax book values, for which an application has to be made. The Federal Fiscal Court (Bundesfinanzhof) regularly has to decide on disputes involving applying to carry over tax book values, which shows just how relevant this subject is. Also in view of the fact that the formal conditions are now being more stringently checked in tax audits, taxpayers should be very careful and diligently when making the filing application.

Insurance premium tax often receives little public attention, although is should not be underestimated. At a standard tax rate of 19%, it represents a significant, recurring and non-deductible cost factor for insurers and insured parties. Against this background, 9 July 2026 is particularly noteworthy: on that day, the Fifth Senate of the Federal Fiscal Court (BFH) heard three insurance premium tax, with mark-ups in group insurance taking centre stage.

Where corporations are reorganized into partnerships - for instance by way of a merger (section 2 of the Reorganization Act [Umwandlungsgesetz–UmwG]) or by way of a change of legal form (section 190) – various “gains” are triggered under the Reorganization Tax Act. The “transfer gain” [Übertragungsgewinn] can in many cases be mitigated or avoided altogether by filing an application (section 3(2) of the Reorganization Tax Act); the “takeover gain” and the “takeover loss” [Übernahmegewinn/Übernahmeverlust] (section 4(4)), by contrast, cannot. A takeover loss cannot be taken into account at all for trade tax purposes (section 18(2) sentence 1), while for income tax purposes it may be taken into account only to a limited extent (section 4(6)). The Federal Tax Court [Bundesfinanzhof–BFH] has now ruled on this matter once again (file ref. IV R 3/23).

German RETT is complex and constitutes a major hindrance to transactions, particularly to intercompany reorganisations. But a recent decision by the European Court of Justice (ECJ) on real estate transfer tax (RETT) could in future bring considerable relief and revitalise the discussion in Germany.

The changes to subsections (2a) to (3a) of section 1 of the Real Estate Transfer Tax Act [Grunderwerbsteuergesetz–GrEStG] have recently drawn attention to the real estate transfer tax (RETT). In addition, the European Court of Justice has pronounced on the Nova Iberomoldes case and has called into question the levying of RETT on restructurings. Moreover, in numerous very extensive circulars in February and March, the tax authorities set out their view of how the provisions of the RETT Act are to be applied. The discussion concerning “tax relief for restructurings within a group” under section 6a of the RETT Act has now “calmed down somewhat”, following controversies in both EU and national law. The Federal Fiscal Court [Bundesfinanzhof–BFH] has now again ruled on the term “controlling enterprise” [herrschendes Unternehmen] as defined by sentences 3 and 4 of section 6a (II R 2/23).

Properly combining customs and VAT processes is crucial to international businesses. Well aligned processes are essential for correctly handling customs and VAT in the international movement of goods, ensuring efficiency and preventing errors. Errors at this interface often go unnoticed for a long time – but lead to significant financial risks and non-compliance. Unclear responsibilities and flawed process flows have a direct impact, particularly in cross-border trade. The following article highlights typical interfaces and areas of risk and explains why consistently aligning customs and VAT is becoming increasingly important.