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When valuing limited partnership interests for gift tax purposes, negative values of the share in the jointly held assets (“Gesamthandsvermögen”) must also be taken into account. This applies even where the limited partner’s contribution has been paid in full and there is no obligation to make additional contributions. In its judgement of 29 Jul 2026, file ref. II R 15/23, the Federal Tax Court [Bundesfinanzhof–BFH] contradicts the view of the German tax administration (R B 97.5 of the Inheritance Tax Guidelines 2019 [Erbschaftsteuer-Richtlinien–ErbStR 2019]). This can significantly reduce the assessed acquisition value, particularly in the context of business succession where shareholder loans are transferred at the same time. The decisive factor is the consistent application of the statutory valuation scheme under section 97(1a) of the Valuation Act [Bewertungsgesetz–BewG].

Taxation on the basis of consideration received is a substantial cash-flow advantage for professional practices and other members of the liberal professions [Freiberufler]: VAT need not be paid until the fee comes in. On its wording, section 20 sentence 1 no. 3 of the VAT Act [Umsatzsteuergesetz–UStG] ties the authorisation solely to income from a liberal profession within the meaning of section 18(1) no. 1 of the Income Tax Act [Einkommensteuergesetz–EStG]. By judgement of 16 Apr 2026 (file ref. V R 16/24), however, the fifth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] adheres to the position that cash-basis taxation [Ist-Besteuerung] is unavailable where the member of a liberal profession voluntarily uses accrual accounting. At the same time, the fifth chamber refines which records remain not harmful.

The transfer of hidden reserves under section 6b of the Income Tax Act [Einkommensteuergesetz–EStG] is designed on a partner-related basis [gesellschafterbezogen]. It can therefore also take place across the boundaries of a single business. The Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled that this can include assets of a partnership limited by shares [Kommanditgesellschaft auf Aktien–KGaA] in which the former partners [Mitunternehmer] of a limited partnership [Kommanditgesellschaft–KG] participate as general partners [persönlich haftende Gesellschafter] (Federal Fiscal Court judgement of 21 May 2026, file ref. IV R 21/23). Its status as a corporation does not stand in the way. In practice, however, what matters is the correct implementation in the balance sheets and the coordination of the tax proceedings involved: despite the favourable finding on substantive law, the case was referred back to the Fiscal Court [Finanzgericht–FG].

Since the Annual Tax Act 2020 [Jahressteuergesetz 2020–JStG 2020], the investment deduction [Investitionsabzugsbetrag] under section 7g of the Income Tax Act [Einkommensteuergesetz–EStG] has only been available to businesses whose profit does not exceed EUR 200,000 (section 7g(1) sentence 2 no. 1 (b) of the Income Tax Act). The definition of this “profit” has for a long time been disputed: the tax balance sheet profit, or the profit for tax purposes after off-balance-sheet adjustments? Following the tenth chamber (Federal Fiscal Court [Bundesfinanzhof–BFH] judgement of 1 Oct 2025, file ref. X R 16, 17/23, Federal Tax Gazette [Bundessteuerblatt–BStBl.] II 2026, p. 412), the third chamber of the Federal Fiscal Court has now also decided in favour of the profit for tax purposes (Federal Fiscal Court judgement of 18 Jun 2026, file ref. III R 38/23). In the case at issue, it was once again the non-deductible trade tax (section 4(5b) of the Income Tax Act) that tipped the balance.

Asset losses resulting from theft, embezzlement or breach of trust [Untreue] can constitute business expenses. In principle, this also applies where a relative of the taxpayer caused the loss. In its judgement of 28 Jan 2026 (file ref. X R 21/23), the Federal Fiscal Court [Bundesfinanzhof–BFH] clarified that neither the family relationship nor lax supervision in itself precludes the deduction. What is decisive is the business-related “triggering factor” [auslösendes Moment] of the loss. At the same time, the evidentiary requirements remain high: the taxpayer must set out and prove the actual loss of assets and the fact that it was caused by the business.

Outpatient care services may be exempt from trade tax under section 3 no. 20 (d) of the Trade Tax Act [Gewerbesteuergesetz–GewStG] even where a third party pools the services and bills them to the social insurance bodies. According to the Federal Fiscal Court [Bundesfinanzhof–BFH], the decisive factor is not the civil-law chain of contracts or billing, but who actually provides the care to the sick persons or persons in need of care and who bears the costs in economic terms. The decision strengthens care models based on a division of labour, but at the same time imposes strict requirements on proving that the 40% threshold has been met (Fed-eral Fiscal Court decision of 28 Jul 2026, file ref. VII R 35/24).

If a merger cannot be effected at book value, for example due to the taxation of unrealized gains upon the transfer of assets, the transferred assets must be recognised at fair market value (“gemeiner Wert”) in the tax closing balance sheet pursuant to section 11(1) sentence 1 of the Reorganisation Tax Act [Umwandlungssteuergesetz–UmwStG].

In its judgment of 10 February 2026, the German Federal Court of Justice (Bundesgerichtshof, “BGH”) confirmed the validity under corporate law of a leaver provision commonly used in private equity structures. The BGH clarified that the compulsory repurchase of a management participation is not equivalent to a squeeze-out under corporate law, but must instead be assessed with the principles governing termination clauses (para. 32). The decisive factor is not an isolated assessment of individual contractual provisions, but rather an “overall assessment of all circumstances of the individual case” (para. 47).

Credit institutions generate partially tax-exempt income from fund investments. In the view of the tax authorities, general pooled refinancing costs should therefore generally be excluded from the deduction of business expenses on a pro rata basis. Düsseldorf Tax Court rejects this blanket approach: in the absence of an identifiable causal nexus between the interest expenses and the partially tax-exempt fund income, section 21 of the German Investment Tax Act (Investmentsteuergesetz – InvStG) does not apply. The judgment of Düsseldorf Tax Court of 17 June 2026 (7 K 1535/24 K,G; appeal against denial of leave to appeal pending, Federal Fiscal Court case no. VIII B 69/26) therefore strengthens the requirement for a case-by-case analysis.

The German Federal Government plans to abolish voluntary self-disclosure with immunity from prosecution while at the same time tightening sanctions for tax evasion. For companies and managing directors, criminal tax law risks are therefore increasing significantly. Why a Tax Compliance Management System (Tax CMS) could become the decisive protection tool going forward.

In its judgment of 13 March 2026, the Baden-Württemberg Tax Court held that replacing the management company of a Luxembourg contractual investment fund (Fonds Commun de Placement, FCP) does not, by itself, trigger German real estate transfer tax where the fund assets include direct or indirect interests in German real estate-owning companies. For fund initiators, investors, management companies and real estate businesses, the decision is highly relevant in practice. It provides helpful comfort in cases where only the management of a Luxembourg fund changes, while the legal ownership of the indirectly held real estate companies remains unchanged.

On 4 June 2026 (C-837/24), the Court of Justice of the European Union (CJEU) held that the EU Capital Duty Directive (2008/7/EC of 12 February 2008) precludes a tax levied on the contribution of shares in real estate-owning companies to a capital company. The German Federal Government stated on 12 August that it sees “no immediate impact on German real estate transfer tax”. By contrast, the Austrian Federal Ministry of Finance has already reacted. This article compares both administrative positions with the judgment, identifies which acquisitions under section 1 of the German Real Estate Transfer Tax Act (GrEStG) may be vulnerable under EU law, and explains what purchasers should do now to keep their assessments open.

Where a commercial or professional partnership is to be transferred to a corporation, a contribution is often the preferred structuring route. The entrepreneur contributes the partnership interest to a newly established or existing corporation by way of a non-cash contribution and, in return, receives new shares in that corporation.

The condition for the separate and uniform assessment of tax bases is an explicit legal basis in section 179 and following of the German Fiscal Code [Abgabenordnung – AO]. Particularly in the case of (typical or atypical) sub-participations [Unterbeteiligungen], the question therefore frequently arises whether, and on what legal basis, such a determination may be made. In a new judgement, the eighth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has clarified that the tax bases of a typical or atypical sub-participation in a share in a corporation are not to be determined separately and uniformly (section 179(2) sentence 2 Fiscal Code) (VIII R 33/24).

Trade tax losses under section 10a of the Trade Tax Act [Gewerbesteuergesetz–GewStG] are assessed separately in the taxpayer’s favour under sentence 6 of section 10a and, if there is positive trading income, deducted from this in the following tax periods. Like income tax and corporate income tax (section 10d(2) Income Tax Act [Einkommensteuergesetz–EStG]), the conditions for minimum taxation are to be observed (section 10a sentences 1 and 2 Trade Tax Act). For commercial partnerships, the partners are entitled to the loss deduction. If the entire interest is transferred, whether for consideration or not, the loss attributed to the departing partner is forfeited without compensation, as the Federal Fiscal Court [Bundesfinanzhof–BFH] has now confirmed (IV R 14/24).

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.