Germany - Tax News July
- 5 days ago
- 5 min read
joerg.gulden@rsp-i.com
July 2026 brought a number of important decisions by the Federal Fiscal Court and new administrative guidelines from the Federal Ministry of Finance, impacting tax practice. The following overview categorizes the key publications by tax type.
VAT
Input tax deduction from legal costs
The Federal Fiscal Court (BFH) confirms the deduction of input tax for legal services that serve to enforce a claim, provided that the claim arises from an intended or actually carried out entrepreneurial activity.
Source: Federal Fiscal Court (BFH), Judgment VR 15/24
Input tax apportionment and supply of goods: two approved revisions
In two rulings, the Federal Fiscal Court (BFH) granted leave to appeal without yet deciding the merits of the cases. VB 28/25 concerns the apportionment of input tax in the case of a building extension with newly constructed, tax-exempt areas. VB 43/25 concerns the VAT classification of beverage production where the recipient of the service procures the water himself.
Sources: Federal Fiscal Court (BFH), Decision VB 28/25 | Federal Fiscal Court (BFH), Decision VB 43/25
VAT conversion rates
The Federal Ministry of Finance (BMF) published the updated overview of the conversion rates to be applied pursuant to Section 16 Paragraph 6 of the German VAT Act (UStG) in July 2026.
Source: BMF letter dated July 1, 2026
Corporate income tax and trade tax
Corporate income tax and trade tax
Municipal tax consolidation
If a subsidiary within a group of companies operates a business that qualifies for preferential tax treatment under Section 8 Paragraph 7 of the German Corporation Tax Act (KStG) in terms of sustained losses, the determination of the division's profitability must be carried out at the parent company level using the gross method. Losses in the division in question cannot be offset against investment income outside of that division.
Source: Federal Fiscal Court (BFH), Judgment IR 5/23
One or more commercial enterprises
When a sole proprietor engages in multiple activities, the distinction between a single business and several independent businesses is determined by the similarity of the activities and their economic, organizational, and financial relationship.
Source: Federal Fiscal Court (BFH), Judgment XR 8/23
Income tax
Part-time tax consulting and profit motive
A prolonged period of losses does not necessarily preclude tax deductibility. A plausible plan to expand business activities after retirement and offset the total losses incurred to date can be decisive.
Source: Federal Fiscal Court (BFH), Judgment VIII R 26/23
Private sales transactions
For the calculation of the ten-year period stipulated in Section 23 of the German Income Tax Act (EStG), the decisive factor is generally the date of the contractual obligations. The transfer of beneficial ownership is irrelevant in this respect.
Source: Federal Fiscal Court (BFH), Decision IX B 24/26
Refund of wage tax in cases covered by double taxation agreements
An employee cannot base a claim for reimbursement analogously on Section 50d Paragraph 1 Sentence 2 of the former Income Tax Act (EStG a.F.) if the employer has wrongfully withheld wage tax. The Federal Fiscal Court (BFH) changed its jurisprudence and simultaneously established a protection of legitimate expectations for reimbursement claims already submitted.
Source: Federal Fiscal Court (BFH), Judgment VI R 12/24
Cross-border commuters under the Double Taxation Agreement with Switzerland
Whether a work-related reason for non-return exists must be assessed based on the specific working circumstances. The distance between the workplace and residence is not the sole determining factor.
Sources: Federal Fiscal Court (BFH), Judgment VI R 31/24 | Federal Fiscal Court (BFH), Judgment VI R 14/24
Working on ships flying the German flag
According to a revised administrative interpretation, work performed on the high seas is no longer considered to be carried out domestically solely because of the German flag. This new interpretation will be applied for the first time to tax assessment and payroll periods beginning after December 31, 2026.
Source: BMF letter dated July 6, 2026
Electric and hybrid electric vehicles
The Federal Ministry of Finance (BMF) adapted its administrative instructions on the private use of company electric and hybrid electric vehicles to the flat-rate electricity price introduced on January 1, 2026.
Source: BMF letter dated July 21, 2026
Conversion tax law
Application for book value in the merger deed
The application for book value required for a merger can already be included in the notarized merger deed when it is submitted to the tax office. The Federal Fiscal Court (BFH) considers Section 4 Paragraph 6 Sentence 6 Alternative 2 of the German Reorganization Tax Act (UmwStG) to be constitutional.
Source: Federal Fiscal Court (BFH), Judgment IV R 3/23
Tax Code and Procedural Law
Fees for binding information
Multiple requests for binding rulings can trigger multiple fees. The determining factor is whether a single, unified set of planned circumstances exists. Following the ruling, the fees are not subject to the statute of limitations for tax assessments.
Source: Federal Fiscal Court (BFH), Judgment II R 38/23
Liability for involvement in tax evasion
According to the decision, the special suspension of the limitation period under Section 191 Paragraph 5 Sentence 2 of the German Fiscal Code (AO) does not apply in favor of a party who has merely provided assistance or instigated the act.
Source: Federal Fiscal Court (BFH), Judgment VII R 18/24
Estimation methods and open cash register
The Federal Fiscal Court (BFH) emphasizes the priority of more precise estimation methods. An internal business comparison is generally more meaningful than an external comparison. In the case of an open cash register, the lack of daily cash balance records constitutes a formal deficiency and can justify an estimation.
Sources: Federal Fiscal Court (BFH), Judgment XR 14/24 | Federal Fiscal Court (BFH), Judgment XR 19/23
Technical rejection of electronic submissions
The Federal Fiscal Court (BFH) granted leave to appeal on the procedural question of how to challenge the technical rejection of an electronically required submission. A decision on the merits has not yet been issued.
Source: Federal Fiscal Court (BFH), Decision VB 59/25
Amendment to the application decree for the Tax Code
The Federal Ministry of Finance (BMF) amended the administrative guidelines for Sections 51, 52, 53, 55, 56, 57, 64, 65, 66 and 67a of the German Fiscal Code (AO). The amendments primarily concern the law governing non-profit organizations, including the use of funds, loss compensation, participations of non-profit entities, and various monetary limits.
Source: BMF letter dated July 2, 2026
legislation
Child benefit without application
On July 9, 2026, the German Bundestag adopted the government's draft bill, which had been amended during parliamentary deliberations. The plan initially provides for automatic child benefit payments starting with the second child, beginning in March 2027.
Source: German Bundestag, resolution of July 9, 2026
Double taxation agreements
Updated German negotiating basis
The German negotiating basis for double taxation agreements has been updated. It takes into account, in particular, the 2017 OECD Model Tax Convention, the results of the BEPS project, and interim changes to domestic tax law.
Source: Federal Ministry of Finance, negotiating basis 2026
Suspension of the Germany-Russia Double Taxation Agreement
According to the official German notification, Germany notified the Russian Federation on June 30, 2026, of the suspension of the agreement of May 29, 1996, and its protocol, effective January 1, 2027. The list of sources evaluated here does not contain any official Russian sources; therefore, this article makes no statement regarding the Russian legal interpretation or implementation.
Source: BMF press release of July 9, 2026
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