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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.

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).

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).

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).

“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).

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).

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).

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).

The overall real interest rate plays a role in various areas of tax law, but it is not always “automatically” implemented into tax law by the legislature. Pension provisions are to be discounted at a “fixed” interest rate of 6%. But other provisions are discounted using an equally “fixed” interest rate of 5.5%. The 5.5% interest rate is also used in the Valuation Act [Bewertungsgesetz–BewG], where it is applied throughout the provisions of sections 12 and following. The Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled on the level of the statutory interest rate regarding section 14 (“lifetime usufructs and benefits”) (file ref. II R 35/23).