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Preservation of Tax Loss Carryforwards in Corporate Restructurings: German Tax Authorities Clarify the Restructuring Exception

Trade tax add-backs and deductions directly affect the amount of trade tax payable. In practice, section 8 no. 1 letter f) of the German Trade Tax Act (GewStG) frequently raises difficult questions of interpretation, particularly where public-law rights of use are concerned. In its recent decision, the Federal Fiscal Court (BFH) clarified when payments qualify as expenses for the licensing of rights within the meaning of this provision — and when they relate merely to a permit with no independent economic value.

In practice, cross-border business activities between Germany and Switzerland involve numerous tax and customs issues. Errors often arise not because of a lack of specialist knowledge, but due to the complex interfaces between different types of taxes, processes and organisational units. A structured VAT and customs health check creates transparency, identifies risks early and points out specific potential for optimisation – before any issues arise with tax or customs authorities.

The planned restriction of immunity from prosecution through voluntary disclosure under section 371 of the German Fiscal Code (Abgabenordnung – AO) marks a fundamental shift in tax criminal law. Not only private individuals, but businesses as well, may lose a key instrument for addressing tax risks through full disclosure. In future, depending on the amount of tax evaded, voluntary disclosure would no longer lead to immunity from prosecution, but would merely have a mitigating effect on sentencing. This reform would significantly increase the pressure on businesses and reinforce the need for early, reliable risk identification, as well as a realignment of tax and defence strategies.

The European Union Parent-Subsidiary-Directive aims to eliminate economic double taxation within a corporate group in the case of cross-border distributions of profit. To do this it avoids burdens from withholding tax on distributions within the EU, among other things. In its implementation in Germany, in section 43b of the Income Tax Act [Einkommensteuergesetz–EStG], full exemption from withholding taxes is tied to a twelve-month holding period and a minimum shareholding of 10%. Alongside this is an exception under section 43b(1) sentence 4 for investment income as defined by section 20(1) no. 1 received in connection with the liquidation or reorganisation of a subsidiary. The Federal Fiscal Court has now ruled on this particularity (file ref. VIII R 8/24).

Building sites and construction and installation projects abroad are a key part of business for international machinery and plant engineering firms. So is the risk of unintentionally establishing a tax-relevant permanent establishment. For the first time since 1999, the new draft Federal Ministry of Finance Circular of 13 February 2026 has updated administrative practice on the concept of permanent establishments, again placing a particular focus on permanent establishments relating to building sites and construction and installation projects. Alongside the familiar duration thresholds and issues of attribution, the draft also shows that permanent establishment risks do not only arise from standard construction and installation activities. Accompanying planning, monitoring, and subsequent services, maintenance or repairs abroad, such as the long-term use of even very small spaces at the customer’s premises (e.g. a locker), may also establish a “general” permanent establishment under Art. 5(1) of the OECD Model Tax Convention. This article presents the main changes and evaluates their significance, particularly to machinery and plant engineering firms. For simplicity, in the following we will often refer simply to construction and installation projects, though building sites are also covered.

The ninth chamber of the Federal Fiscal Court has issued a ruling on the conditions for off-setting losses against other income. In accordance with long-established case law, the pro-visions in section 22 no. 3 sentences 3 and 4 of the Income Tax Act and section 23(3) sen-tences 7 and 8 of the Income Tax Act are constitutional. In typical cases, a waiver on grounds of equity is not an option.

The distinction between the seven types of income under section 2(1) sentence 1 of the Income Tax Act [Einkommensteuergesetz–EStG] is significant in various contexts, such as when determining the tax rate (section 32a vs. section 32d). From the taxpayer’s perspective, however, the tax base differs due to the partial income method when distinguishing between section 17 (income from business operations) and section 19 (income from employment). From the employer’s perspective, the obligation to withhold income tax only applies to income from employment (sections 38 and following). The Federal Fiscal Court [Bundesfinanzhof–BFH] has now again ruled on this distinction (file ref. IX R 1/25).

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).

Digital business models and IT-enabled processes play a key role today in being successful in business. And the regulatory requirements are constantly increasing at the same time – particularly in data protection law, cyber security and in the use of artificial intelligence (AI).

In section 13c of the VAT Act [Umsatzsteuergesetz–UStG], VAT law sets out liability when claims are assigned, pledged or seized. When the assignment or pledge is made to a non-taxpayer or seized by a non-taxpayer, the administrative authorities expressly considered until now that there was no liability under section 13c. Non-taxpayers include bodies governed by public law if they do not carry on any economic operations as defined by section 2(3). But by applying section 2b, changes occur that affect bodies governed by public law. The Federal Ministry of Finance (BMF) has now commented on these changes in a new Circular.

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).

Following the judgement of the German Federal Fiscal Court [Bundesfinanzhof–BFH] of 27 March 2024, up to the end of 2025 flat-rate taxation at 25 per cent could be charged on benefits granted in connection with company events even if the event was not open to all employees. The Tax Amendment Act [Steueränderungsgesetz] 2025 has significantly tightened this option with effect from 1 January 2026. Flat‑rate taxation is now only permitted if the event is open to all the employees of a business or business unit – otherwise, substantial additional tax and social security costs may arise. What are the practical implications of this, and what should companies look out for in 2026? We’ll get you on course and explain the details.

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.