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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.

“Tax offices and the Federal Central Tax Office may upon request provide advance rulings on the treatment of precisely defined, as yet unrealised circumstances if this is of particular interest due to the existence of significant tax implications”, states section 89(2) sentence 1 of the Fiscal Code [Abgabenordnung–AO]. Taxpayers that are planning a restructuring which they have not yet carried out, for instance, may obtain legal certainty as to what the consequences of this will be with respect to the tax authority. The Federal Fiscal Court [Bundesfinanzhof–BFH] has now again taken a position on the requirement to pay a fee for the advance ruling in complex cases (II R 38/23).

Cross-border commuter rules are found in several German double tax treaties (DTTs) [Doppelbesteuerungsabkommen-DBA] with neighbouring states, particularly those with France, Austria and Switzerland. Other DTTs with such states are not equipped with such a rule. The cross-border commuter rules lead to taxation outcomes that diverge from the otherwise customary rules on "employment" under article 15 of the 2025 OECD Model Convention [OECD-Musterabkommen-OECD-MA] 2025/article 14 of the 2026 German Model Treaty. The Federal Tax Court [Bundesfinanzhof-BFH] has now again decided on the cross-border commuter rule under the DTT with Switzerland (file ref. VI R 31/24).

Income taxes are frequently levied through withholding taxes in both purely domestic and cross-border contexts. The withholding of withholding tax on capital income (sections 43 and following of the Income Tax Act [Einkommensteuergesetz-EStG]) is (also) final in many cases even for taxpayers subject to resident tax liability (section 43(5) sentence one). Furthermore, in the taxation of taxpayers subject to non-resident tax liability (section 1(4); section 2 of the Foreign Transactions Tax Act [Außensteuergesetz-AStG]; section 2 of the Corporate Income Tax Act [Körperschaftsteuergesetz-KStG]), the “finality effect” of such withholding taxes often precludes the possibility of assessment (section 50(2) sentence one of the Income Tax Act; section 32(1) of the Corporate Income Tax Act). The possibility of obtaining a refund of overpaid withholding taxes is particularly essential for taxpayers subject to non-resident tax liability. The option, in this case, instead of challenging the underlying self-assessment under section 50d(1) sentence 2 of the Income Tax Act (old version) (now: section 50c(3) sentence 1), to obtain a refund has been denied by the sixth chamber of the Federal Tax Court [Bundesfinanzhof-BFH] (file ref. VI R 12/24). However, the sixth chamber of the Federal Tax Court has provided for a transitional provision.

Concerning tax-related time limits, the Fiscal Code [Abgabenordnung–AO] basically refers back, in section 108, to sections 187 to 193 of the Civil Code [Bürgerliches Gesetzbuch–BGB]. In section 109 it also addresses the extension of these time limits and, in section 110, restoration to the previous status (restitutio in integrum). But time limits also play a role in the substantive provisions of income tax law. In particular, section 23 of the Income Tax Act [Einkommensteuergesetz–EStG] on “private disposal transactions” contains this kind of time element. Depending on the asset concerned, the time limits of one or ten years apply. How these are to be calculated is therefore of considerable importance for taxability. The Federal Fiscal Court [Bundesfinanzhof–BFH] has reaffirmed its settled case law on this point (IX B 24/26).

As a rule, licensing and use of rights agreements abroad trigger withholding tax liability – and it’s right here that considerable risks arise in practice. This is how tax deduction in accordance with section 50a of the Income Tax Act [Einkommensteuergesetz–EStG] is often overlooked or misapplied and inadequately formulated in the underlying contracts – with consequences of liability to match for the licensee in Germany. A Withholding Tax Health Check helps, firstly, to identify these kinds of issues, to check processes and responsibilities and to close the interface between the specialist departments and the tax department – before a tax audit does.

When it comes to income tax, the death of a taxpayer marks a break that, while it does not interrupt the assessment period (section 25(1) of the Income Tax Act [Einkommensteuergesetz–EStG]), does raise numerous other questions. In special provisions such as section 6(3) of the Act and section 11d(1) of the Income Tax Implementation Directive [Einkommensteuerdurchführungsverordnung–EStDV], the legislature has clarified specific issues in this area, just as section 45 of the Fiscal Code [Abgabenordnung–AO] partially resolves procedural issues. However, deductions — such as loss carryforwards under section 10d of the Income Tax Act — do not pass to heirs who are universal successors (section 1922(1) of the Civil Code [Bürgerliches Gesetzbuch–BGB]). The tenth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled along the same lines regarding the “quasi-special expenses” under section 10f of the Income Tax Act (“Tax relief for listed historic buildings and buildings in redevelopment areas and urban development zones used as residences”; file ref. X R 23/24).

Trade tax liability under section 2(1) of the Trade Tax Act [Gewerbesteuergesetz–GewStG] is substantively linked to business activity under section 15(2) of the Income Tax Act [Einkommensteuergesetz–EStG]. However, there are differences in the timing between income tax and trade tax. Trade tax liability under section 2(1) of the Trade Tax Act only arises once all the conditions that constitute business activity have been met and the business activity has been started. Income tax, on the other hand, covers all business activities starting from the first preparatory step to open a business. With regard to notional business activities (section 15(3) of the Income Tax Act), which also give rise to a trade tax liability, the Federal Fiscal Court [Bundesfinanzhof–BFH] has again now ruled on this issue (file ref. IV R 5/24).

Corporate fitness programmes are an established way of retaining staff and promoting their health. In terms of tax, employers and employees particularly benefit when preventive activities fulfil the criteria of section 3 no. 34 of the Income Tax Act [Einkommensteuergesetz – EStG] and so can be offered tax-free.

A Payroll Health Check is a systematic review and assessment of your company’s payroll accounting. The goal is to identify risks, correct errors and set up payroll to be fit for the future. We take an allround approach with the motto “prevention, not reaction”. We place our main focus on practically carrying out your internal policies and remuneration models in operational payroll. The result is a risk assessment that includes recommendations for action and, if needed, support for your payroll department with making corrected returns and a review of historical payroll periods.

Trade tax liability under section 2(1) of the Trade Tax Act [Gewerbesteuergesetz–GewStG] is substantively linked to business activity under section 15(2) of the Income Tax Act [Einkommensteuergesetz–EStG]. However, there are differences in the timing between income tax and trade tax. Trade tax liability under section 2(1) of the Trade Tax Act only arises once all the conditions that constitute business activity have been met and the business activity has been started. Income tax, on the other hand, covers all business activities starting from the first preparatory step to open a business. With regard to notional business activities (section 15(3) of the Income Tax Act), which also give rise to a trade tax liability, the Federal Fiscal Court [Bundesfinanzhof–BFH] has again now ruled on this issue (file ref. IV R 5/24).

In the area of income taxes, taxpayers have numerous election rights that can have a significant impact on their tax burden. The income tax consequences are not always as dramatic as those resulting from the extended deduction under section 9 no. 1 sentence 2 and following of the Trade Tax Act [Gewerbesteuergesetz–GewStG], which triggers an (almost complete) exemption from trade tax. Other elections can reduce the income tax burden, for example, when electing for the partial income method (“Teileinkünfteverfahren”; section 32d(2) no. 3 of the Income Tax Act [Einkommensteuergesetz–EStG]), which makes actual income-related expenses deductible. With regard to the deduction for special expenses under section 10a, the Federal Fiscal Court [Bundesfinanzhof–BFH] has now once again ruled on making elections and the procedural implications (file ref. X R 28/24).

Under German tax law, shipping is particularly supported in a national context through imput-ed taxation (“tonnage taxation”; “Tonnagenbesteuerung”) under section 5a of the Income Tax Act [Einkommensteuergesetz–EStG] and section 7 sentence 3 of the Trade Tax Act [Gew-erbesteuergesetz–GewStG]. In a cross-border context, ship personnel who are subject to non-resident tax liability only derive German-source income under (a) of section 49(1) no. 4 of the Income Tax Act, whereas flight personnel must also observe an additional specific provi-sion in letter (e). Furthermore, German double tax treaties (DTT) often contain provisions modeled after article 15(3) of the 2025 OECD Model Convention, on which the Federal Fiscal Court [BFH; Bundesfinanzhof] has now ruled (file ref. VI R 1/24).

A declaration procedure is to be added to the conditions VAT groups must satisfy in future. In the draft bill for an Annual Tax Act dated 19 May 2026, the current rules on VAT groups (section 2(2) no. 2 VAT Act) were rescinded and replaced by new rules in draft section 2c. The familiar conditions for inclusion – financial, economic and organisational inclusion – and the legal consequences of VAT grouping basically remain the same. What is new is that from 1 January 2029 a VAT group will only take effect when the controlling company explicitly submits a declaration to the tax office. It will also be possible to include partnerships as controlled companies in future if they satisfy the conditions for inclusion.

New rules for electricity tax exemptions from 2026 – changes to applications, the definition of plant, and obligations for operators of solar, wind and CHP plants.