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For many years now, the trade tax burden has been based solely on the assessment basis of “trade income” (section 6 of the Trade Tax Act [Gewerbesteuergesetz–GewStG]). Although this is calculated from the base amount determined under the Income Tax Act and the Corporate Income Tax Act (section 7 sentence 1 of the Trade Tax Act), it is modified by the provisions of section 7 sentence 2 and following of the Trade Tax Act, sections 7a and 7b, and the add-backs and deductions under sections 8 and 9, particularly to implement the nature of the trade tax as a tax on assets. This also includes an add-back for the temporary transfer of rights, on which the fourth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled (file ref. IV R 26/23).

The German federal government is planning to counter the current high costs of energy by introducing a relief premium. Employers will be able to make a voluntary pay-out to their employees of up to 1,000 euros tax- and social security-free by the end of 2026.

On paper, tax processes often appear clearly structured and well documented. However, operational reality frequently reveals a different picture: divergences in data flows, system logic, and interfaces are common in complex system landscapes.

Whoever has been importing cement, iron and steel, aluminium, fertilisers, electricity or hydrogen into the EU since 1 January 2026 and has not yet heard of CBAM (Carbon Border Adjust-ment Mechanism), may well stand at the EU border and rub their eyes in bewilderment. Since then the definitive phase of the CBAM Regulation (EU) 2023/956 has been in force, and what was a simple reporting obligation has turned into compulsory compliance duties that already start with a digital customs declaration (e.g. reporting the correct document codes and any individual registrations). By 30 September 2027 at the latest affected businesses must comply with their reporting duties and submit the certificates they previously had to buy. To do this, auditable processes and documentation have to be set up and governance models created.

Article 3 of the Seventh Regulation Amending Tax Regulations expands the Digital Payroll Interface (Digitale Lohnschnittstelle–DLS). In future, employers are not only to prepare standard payroll data digitally but also the data determined and used for this purpose used by upstream and ancillary systems. The tax authorities’ goal is understandable. In practice, however, the change will throw up considerable technical, organisational and data protection questions. This new version of section 4(2a) of the Income Tax Implementing Regulation (Lohnsteuer-Durchführungsverordnung–LStDV) applies to the data recorded in payroll accounts from 1 January 2027.

The Federal Ministry of Finance has published the draft of the new Tax Audit Regulations. These are to replace the current tax audit regulations and place a stronger focus on risk-based audits, faster proceedings and more duties on companies to cooperate.

Early retirement schemes are a widely used tool in personnel policy. But presentation in the accounts has always thrown up complex questions, particularly related to the recognition and measurement of provisions. In its judgement handed down on 5 February 2026 (IV R 11/24), the Federal Fiscal Court (Bundesfinanzhof) made significant clarifications, after the judgement from the lower court, Düsseldorf Fiscal Court, on 24 May 2024 (3 K 2044/18 F).

Exchanging shares under section 21 of the Reorganisation Tax Act [Umwandlungssteuergesetz–UmwStG] allows a group of companies to be rapidly restructured: shares conferring a controlling interest in one corporation are contributed to another corporation in exchange for the issuance of new shares. If an application is made, the exchange can be valued below fair market value, e.g., at the carrying amount. What’s more, under section 8b(2) of the Corporate Income Tax Act [Körperschaftsteuergesetz–KStG] there is no blocked period for groups in which all the entities are corporations.

In the case of partners in a partnership with limited liability, the transparent taxation under section 15(1) sentence 1 no. 2 of the Income Tax Act is restricted in loss situations. The limited partner may offset and deduct his losses directly only to the extent that he also bears them economically (section 15a(1) of the Income Tax Act [Einkommensteuergesetz–EStG]). Otherwise, pursuant to section 15a(2) of the Income Tax Act, the loss is merely assessed as offsettable [verrechenbar]. In that case, it reduces exclusively future profits from the interest in that specific limited partnership. The Federal Fiscal Court [Bundesfinanzhof–BFH] has now issued a detailed opinion on the special features of paragraph 1a of section 15a of the Income Tax Act, in particular regarding its constitutional assessment (file ref. IV R 27/23).

The only silent partnership in commercial law is that under sections 230 and following of the German Commercial Code [Handelsgesetzbuch–HGB]. This is an internal partnership without any assets of its own. Under income tax law, it essentially constitutes a “fully fledged” partnership if the silent partnership has been established in relation to a business operation or if the conditions for the notional business activities under section 15(3) of the Income Tax Act are met (Explanatory Notes to the Income Tax Act [Einkommensteuer-Hinweise–EStH] 15.8(6), “Atypical silent partnership”). Procedural law is also challenging, particularly in cases where the atypical silent partnership has been established in relation to a partnership. The first chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled on this matter (file ref. I R 13/25, previously I R 4/13).

A “withdrawal” (Sect. 4(1) sent. 2 of the Income Tax Act) of business assets generally leads to the realization of hidden reserves. However, this requires the taxpayer to perform an act of withdrawal. Sect. 4(1) sent. 3 and 4 of the Income Tax Act creates a fictitious withdrawal if German taxation rights are excluded or limited. The Federal Tax Court (file numbers I R 41/22, I R 6/23) - in agreement with the tax authorities - considers the elements of the legal rule regarding the loss of the German right to tax to be fulfilled even if this impairment of the right to tax is not triggered by the taxpayer, but by a change in the legal framework (“passive loss of the German right to tax (“Entstrickung”)”).

Businesses may face serious risks in criminal tax law after the Federal Court of Justice (BGH) ruled on 10 December 2025 (1 StR 387/25) to change its previous case law. Incorrect preliminary VAT returns and a related incorrect annual return no longer count as a single offence. Instead, the offences stand next to each other and are to be evaluated under criminal law separately. This results in a considerable tightening of the legal consequences to taxpayers and all those involved in the preparation and submission of preliminary VAT returns and annual returns.

Berlin-Brandenburg Tax Court clarifies that US withholding tax can be credited against trade tax

Employment and social security law risks often arise not from isolated errors, but from unclear responsibilities, evolved processes and a lack of coordination between HR, payroll, specialist departments and external service providers. The consequences range from significant back payments to personal liability risks for managing directors and other responsible corporate bodies.

The sale of a participation in a partnership triggers consequences under trade tax law that “require some getting used to”. If a natural person holding a direct interest sells his participation, no trade tax is due at all, except in the cases specified in Sect. 18(3) of the Reorg Tax Act (“Umwandlungssteuergesetz”). If, on the other hand, a corporation sells its participation, trade tax is due in every case (Sect. 7 sent. 2 no. 2 of the Trade Tax Act), which the partnership whose participation was sold owes itself. The Federal Tax Court had to decide (file number III R 38/22) whether trade tax is due for the selling corporation if the sold partnership is not yet subject to trade tax under Sect. 2 of the Trade Tax Act.

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