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We present you the recent case law of the Federal Fiscal Court and a regional Fiscal Court on the tax implications of pension obligations.

Gains on disposal when selling an interest in a partnership are not usually subject to trade tax. According to the Federal Fiscal Court judgment of 21/11/2024 (file ref. IV R 26/22), this principle does not apply in certain circumstances, however, resulting in the gains on disposal being subject to trade tax. In these cases, the trade tax is not charged to the seller but to the partnership. This can result in undesirable burdens on partners who are not involved in the sale.

The break-up of the “traffic light” coalition and the Bundestag elections that were brought forward to 23 February 2025 are having a considerable impact on tax reforms and plans for legislation. The lack of a majority makes concluding key legislative plans more difficult.

The Federal Fiscal Court (Bundesfinanzhof) had already blocked applying expanded trade tax reductions to lettings between two controlled companies belonging to the same consolidated tax group in the past. According to the Federal Fiscal Court’s latest judgment, of 11/07/2024 (III R 41/22), this is also to apply if the renting controlled company sublets the properties to third parties. This may result in additional tax burdens in the consolidated tax group in the subletting model.

Last year the Federal Fiscal Court (Bundesfinanzhof – BFH) decided that paying a pension and salary to an owner-director at the same time does not mean that in principle the pension is to be classified as a hidden profit distribution. The tax authorities only partially adopted the principles of the judgment in the latest amendment of its Federal Ministry of Finance (BMF) circular. Cases where directors work part-time are critical.

Loans from shareholders and intragroup loan relationships (intercompany loans) are a popular means of structuring how liquidity is provided and distributed within a group of companies. If the debtor gets into difficulties, the creditor is usually affected not only by the loss of value or the bad debt but – if the loans are between corporations and the shareholding is at least 25 per cent – by the ban on tax deduction under Section 8b para. 3 sentence 4 f. of the Corporation Tax Act [KStG] as well.

Including an increase in funding volumes and faster payout. We’ve put the most important details together below.