Germany’s Federal Constitutional Court (BVerfG) determined that a request from a lower court, for judicial review of the trade tax add-back rules was “inadmissible.”
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:
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.