If an entrepreneur subject to trade tax receives dividends from foreign corporations, these dividends are taxable under the conditions of the so-called "tax exemption". trade tax intercompany privilege (Section 9 no. 7 GewStG) are tax-exempt in Germany. The law distinguishes between dividends from corporations that are resident for tax purposes in the EU and dividends from non-EU companies.
While dividends from EU corporations are tax-exempt if they merely hold a stake of at least 10% at the beginning of the year, dividends from third-country companies are only tax-exempt from the beginning of the tax period. uninterrupted Participation rate of 15% and In addition to the fulfilment of numerous activity requirements at the level of the subsidiary and at the level of sub-subsidiaries, tax exemption is granted.
The ECJ ruled on 20 September 2018 in case C-685/16 (EV) that the conditions for the reduction in accordance with Section 9 no. 7 GewStG for profits from shares in a third-country company are contrary to EU law (violation of the free movement of capital).
The Financial management has now drawn the necessary consequences from this judgement until new legislation is passed (identical decrees of the supreme tax authorities of the federal states on the interpretation of Section 9 no. 7 GewStG of 25 January 2019 in conformity with EU law). In all open cases, Section 9 no. 7 GewStG is to be interpreted as follows in accordance with EU law:
- The shareholding of at least 15 % in the subsidiary only has to exist at the beginning of the reporting period.
- The activity requirements at the level of the subsidiaries and sub-subsidiaries and the associated evidence requirements do not apply.
Yours TAXGATE Team will be happy to answer your questions at any time.
