The German trade tax applies to any commercial business activity in Germany, and the trade tax assessment is based on the amount of trade income. For these purposes, “trade income” is determined by reference to the profit from commercial business activity as determined by the income tax law or corporate tax law, and modified by certain add-backs and deductions. The add-backs can include amounts of debt remunerations (interest on loans) as well as rent and lease payments for fixed or movable assets.
In the case before the court, a German limited liability company (GmbH) operated several filling stations and, in 2008, incurred expenses for debts as well as for rents and leases for which the taxpayer added back partial amounts to its profits under the add-back rules of the trade tax. The taxpayer, however, asserted that these add-backs were incompatible with the German Constitution, and sought judicial review. A lower court (Hamburg) found the add-back rules were unconstitutional, but suspended its proceedings pending review by the Federal Constitutional Court which ultimately rejected the review request.
Concerning the constitutionality of the trade tax add-back rules, there are other proceedings pending before the Federal Tax Court (BFH).
Read a May 2016 report [PDF 370 KB] prepared by the KPMG member firm in Germany: German Tax Monthly
Other topics discussed in this report concern:
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