In the 2026 annual preview of the Federal Constitutional Court (BVerfG), it is announced that a decision is expected this year on the issue of loss offsetting restrictions for share disposal transactions. We had already discussed this case in our Blog from 11.06.2021 and provide a brief overview below:
Overview
With the introduction of the flat-rate withholding tax on 1 January 2009, the legislator had already created two loss offsetting pots: Share losses (so-called bad loss pool) can only be offset against share gains, while other losses (so-called good loss pool) can be offset against all capital gains. This separate offsetting of losses was justified with the aim of „preventing share speculation transactions that could lead to abstract budgetary risks“ (cf. BT-Drs 16/5491, p. 19).
The preliminary ruling of the Federal Fiscal Court
In a ruling dated 17 November 2020 (case no. VIII R 11/18), the highest German tax court referred the question to the Federal Constitutional Court as to whether it is compatible with the principle of equality if losses from the sale of shares can only be offset against gains from the sale of shares. The Federal Fiscal Court (BFH) is convinced that this regulation violates the constitutional principle of equality. In the opinion of the court, there is no plausible economic reason for the legal disadvantageous treatment of share losses (no danger of significant tax losses due to qualified budgetary risks; no prevention of abusive arrangements, etc.).
Yours TAXGATE Team supports wealthy private individuals and family businesses with complex tax issues and represents their interests vis-à-vis the tax authorities.
