Questions & Answers
Answers to common questions.
Curated from our articles on tax advisory, statutory audit and legal services — alphabetical, filtered by audience or topic.
For you as…
Topics
2304 questions · Page 18 / 47
Why is the business cessation under § 16 Abs. 3b EStG not deemed an act of the decedent?
Even though the cessation declaration has retroactive tax effect to the date of death, it is based on a decision made by the heirs after the inheritance occurred. The decedent did not cease the business but merely leased it out, so the tax-triggering act is attributable to the heirs.
As of: October 2023
Why is a bad debt loss not considered a reduction of the purchase price within the meaning of the GrEStG?
Under the Real Estate Transfer Tax Act (GrEStG), a subsequent reduction of the purchase price can change the tax base. According to the BFH, however, an insolvency-related default on the receivable does not qualify as such a reduction, since the purchase agreement remains effective and the contractually agreed purchase price stays unchanged.
As of: October 2016
Why is a cafeteria not considered essential for nursing services?
Since residents already receive breakfast, lunch and dinner as well as dining rooms on the wards, the cafeteria merely represents an additional offering. It also serves relatives and visitors and is therefore dispensable for the actual nursing and care services.
As of: November 2023
Why doesn't the reduced VAT rate that applies to traditional books also apply to photo books?
Traditional books are intended for general distribution through publishers or bookshops and typically carry an ISBN. Photo books, by contrast, are individually designed by the customer, serve to document personal or business events, and are not intended for general distribution. They therefore fall outside the scope of the reduced VAT rate under No. 49 lit. a of Annex 2 to the UStG (German VAT Act).
As of: May 2016
Why is lifelong learning considered especially important for Steuerberater?
Steuerberater (German Certified Tax Advisors) must stay continuously informed about tax-related changes, as laws, regulations, and BMF letters are issued on an ongoing basis. In addition, the use of artificial intelligence is becoming increasingly important, requiring dedicated training. Only through constant further education can Steuerberater ensure the professional quality of their advisory services.
As of: June 2024
Why does the medical treatment VAT exemption not apply to the provision of rooms?
The exemption under § 4 No. 14 UStG requires a medical treatment service. The mere rental of practice rooms and equipment does not meet this substantive requirement, even if the rooms are subsequently used for medical activities.
As of: October 2016
Why do legal experts consider the trade tax add-backs unconstitutional?
A study commissioned by the HDE and the Association of Family Businesses (ASU) finds that the objective net principle is violated. Under this principle, only the balance between operating income and operating expenses may, as a rule, be taxed. Since the add-backs partially reverse deductible expenses, over-taxation can occur, which in the experts' view breaches the principle of equal treatment.
As of: August 2013
Why has North Rhine-Westphalia halted the emergency aid reporting procedure?
The NRW state government has identified several problematic accounting requirements and forwarded the relevant points to the federal government. The federal government has asked the states for their comments. Until a uniform federal solution is in place, NRW is pausing the procedure to avoid disadvantages for aid recipients.
As of: July 2020
Why did the Federal Constitutional Court declare the property tax unconstitutional?
The Federal Constitutional Court (Bundesverfassungsgericht) ruled that the assessment of the property tax (Grundsteuer) is unconstitutional because the underlying standard assessed values (Einheitswerte) for real estate have not been updated for more than 50 years. According to the court, these outdated values lead to significant unequal treatment of property owners and are entirely obsolete.
As of: April 2018
Why did the Federal Constitutional Court rule the loss forfeiture under § 8c KStG unconstitutional?
The Federal Constitutional Court held that the flat-rate reduction of loss carryforwards upon a change of shareholders between more than 25% and up to 50% may not apply without differentiation. The provision violates the principle of equality because it also captures cases in which no abuse exists. The legislator was required to enact a new regulation by 31 December 2018; otherwise, the rule is retroactively void.
As of: June 2017
Why did the Hamburg Tax Court consider the add-backs unconstitutional?
The Hamburg Tax Court regarded the add-back rules in force since 2008 – particularly for interest payments – as violating the principle of taxation according to ability to pay. It questioned whether the BVerfG's classification of trade tax as an object-based tax is still appropriate and referred the matter to the Federal Constitutional Court for clarification.
As of: November 2012
Why did the tax office and tax court initially reject the reduced tax rate?
They argued that the preferential treatment of taxi services under § 12 Abs. 2 Nr. 10 UStG was tied to passenger transport by motor vehicle within the meaning of the German Passenger Transport Act. Since horse-drawn carriages are not motor vehicles, this requirement was not met. The BFH rejected this narrow interpretation.
As of: January 2020
Why does the Lower Saxony Tax Court consider the solidarity surcharge unconstitutional?
The Lower Saxony Tax Court (Finanzgericht Niedersachsen) sees the solidarity surcharge as violating the principle of equal treatment under Article 3 of the German Basic Law (Grundgesetz). The reasoning is that the surcharge is assessed in different amounts for comparable situations, for example in the case of foreign income or in interaction with the trade tax (Gewerbesteuer).
As of: August 2013
Why does the BFH consider the 6% interest rate permissible despite low market rates?
The BFH bases its decision on the view that, for the period up to March 2011, the legislator was not constitutionally required to adjust the statutory interest rate to the lower market rate for investments. The decisive factor is not only the comparison with investment rates, but also with the interest payable on borrowed funds.
As of: September 2014
Why does the Bundesfinanzhof consider the real property tax unconstitutional?
The Bundesfinanzhof (Federal Fiscal Court) regards the standard valuation of real property as a violation of the general principle of equality under Art. 3 of the Basic Law. In its view, the real property tax has been unconstitutional since at least 01.01.2008, as the outdated values lead to unequal taxation of comparable properties.
As of: March 2018
Why does the consumer association Verbraucherzentrale NRW consider the Dash Button legally questionable?
Verbraucherzentrale NRW primarily criticises the lack of price transparency, as customers only learn the price after placing the order and have no opportunity to compare. It also objects that order buttons in online retail must be clearly labelled, which is not the case with the Dash Button. The required Prime membership and the data-intensive Amazon app are likewise subject to criticism.
As of: September 2016
Why is the book value, rather than the fair market value, decisive in a tax-neutral withdrawal?
The BFH reasons that in a tax-neutral withdrawal, the hidden reserves were not realized and taxed within the business. Valuing the asset at fair market value would mean these reserves remain permanently untaxed. Consequently, for purposes of § 23 EStG, the book value must also serve as the acquisition cost, ensuring that the hidden reserves are captured upon a subsequent sale.
As of: July 2022
Why is the Soli not a suitable instrument for spreading income tax rates, according to the BRH?
The solidarity surcharge (Soli) was originally introduced to finance German reunification and is earmarked for that purpose. According to the Bundesrechnungshof (Federal Court of Auditors), if the government wants to achieve a greater spread of the income tax burden, the appropriate approach would be to adjust the income tax rate schedule itself, not to selectively retain the Soli for higher incomes.
As of: June 2019
Why is deducting expenses as Werbungskosten (income-related expenses) more advantageous than as Sonderausgaben (special expenses)?
Werbungskosten can be claimed even with no or low income, provided there is a connection to your future profession. If they exceed your income, a loss carryforward is possible and can be offset against higher income in later years. Sonderausgaben, by contrast, are forfeited if no income exists and are capped at EUR 6,000 per year.
As of: August 2023
Why is personal exchange difficult to replace when working from home?
Despite email and digital tools, working from home lacks the spontaneous brainstorming between colleagues in passing. Brief professional conversations among coworkers often lead to new solutions that electronic communication cannot fully replicate. This direct exchange is especially valuable when dealing with new or unclear topics.
As of: December 2020
Why is the goodwill amortization at risk when acquiring a medical practice?
Recent developments in case law are calling into question the previously customary tax amortization of the goodwill of a medical practice. It appears that the purchaser may, in future, no longer be able to deduct the portion of the purchase price attributable to the practice value for tax purposes, or only to a limited extent. This can significantly affect the economic viability of a practice acquisition.
As of: April 2007
Why is the allocation of a photovoltaic system to business assets important?
Only a timely allocation to business assets allows the input VAT deduction from the acquisition and installation costs of the photovoltaic system to be claimed with the tax office. Without this allocation, there is no option to recover the VAT paid as input tax.
As of: May 2016
Why is the extended trade tax deduction particularly contentious in practice?
There is a significant difference in trade tax burden between the simple and the extended deduction, as the extended version allows for a complete exemption of real estate income. For this reason, it is reviewed restrictively by the tax authorities and is frequently the subject of tax court proceedings. Careful structuring and documentation are therefore advisable.
As of: March 2023
Why can it make sense to apply for taxation despite the exemption threshold?
If income-related expenses exceed the income, the exemption threshold would prevent a tax-deductible loss. By applying for taxation, the losses can be claimed and offset against other income, which may reduce the overall tax burden.
As of: December 2023
Why is certified quality management relevant for tax advisory clients?
Certified quality management ensures standardized processes when handling tax matters, reducing errors and safeguarding deadlines. Clients benefit from transparent workflows, clear responsibilities, and continuous service improvement. External audits ensure ongoing compliance with these standards.
As of: August 2009
Why can the cost of a Sky subscription not be split into private and business portions?
A split fails because there are no objectively verifiable criteria for an allocation standard. Since the taxpayer typically also watches matches out of general interest and cannot provide specific records of use, the business portion cannot be properly delineated.
As of: April 2015
Why is the expropriation of real estate not a private sale transaction under § 23 EStG?
In the case of expropriation, the owner lacks the personal intent to transfer the property. However, since a private sale transaction requires a voluntary transfer by the taxpayer, the requirements of § 23 EStG are not met. A taxable sale is therefore ruled out.
As of: May 2022
Why is an online presence economically relevant for skilled trade businesses?
More than 40% of customers today search for tradespeople and other service providers specifically online. Without a web presence, businesses are simply not found by a large share of potential clients. In concrete terms, this means lost orders, revenue and profits.
As of: August 2013
Why is a gift to a GmbH particularly disadvantageous from a tax perspective?
A GmbH receiving a gift is classified in tax class III and is granted only very limited allowances. The applicable tax rates range between 30 and 50 percent. This results in a significantly higher gift tax burden than a direct transfer to family members.
As of: June 2009
Why must a prepaid expense (aktiver Rechnungsabgrenzungsposten) for VAT be recognised in the tax balance sheet?
Since the advance payment must be recognised as a liability at its full (gross) amount in the tax balance sheet, the VAT already to be remitted is initially recorded as an expense. To offset this, a prepaid expense (aktiver Rechnungsabgrenzungsposten) must be recognised as of the balance sheet date. It is released without affecting profit or loss once the underlying transaction is performed and the advance payment is offset against the receivable to be capitalised.
As of: September 2019
Why is the date of the notarial purchase agreement not decisive for the purchase price allocation?
For assessing acquisition costs, the date of delivery is decisive. For real estate, this is the date on which possession, benefits, risk, and burdens actually pass to the buyer. The notarial signing initially only creates the contractual obligation.
As of: January 2023
Why can repaying the emergency aid still in 2020 be tax-advantageous?
The Corona emergency aid (Soforthilfe) constitutes taxable business income. If excess funds are repaid within the same fiscal year, the repayment directly reduces the 2020 profit. For this reason, many recipients wish to settle accounts still in 2020 so that the repayment is recorded in the current assessment period.
As of: November 2020
Why can § 616 BGB exclude the employer's right to reimbursement?
Under § 616 BGB, an employee retains their entitlement to wages if they are prevented from working for a relatively short period through no fault of their own. If this provision applies, an independent employment law claim for continued wage payment exists, meaning there is no loss of earnings within the meaning of § 56 IfSG. In such cases, the employer cannot claim reimbursement from the authority and must bear the wage costs themselves.
As of: November 2020
Why does NRW continue to purchase tax CDs from abroad?
North Rhine-Westphalia continues to purchase CDs containing data on suspected tax evaders as long as no effective tax treaty with Switzerland is in place. The aim is to uncover tax evasion and curb revenue losses. In the long term, an automatic exchange of information between states is being pursued.
As of: February 2014
Why does the legislator tie the tax reduction to the place where the service is rendered?
The main purpose of the tax reduction for household-related services is to combat undeclared work in the domestic sphere. For this reason, the benefit is deliberately limited to services actually performed within the household, even though this can lead to strict outcomes in individual cases.
As of: August 2016
Why could the artists' social security contribution rate be reduced?
The Act to Stabilize the Artists' Social Security Contribution Rate brought greater honesty and transparency to levy collection and audits. As a result, around EUR 30 million in additional revenue was generated in 2015, and more than 30,000 additional companies now comply with their contribution obligations. This broader distribution of the burden allows the rate to be lowered by 0.4 percentage points.
As of: June 2016
Why does the IDW criticize the capitalization factor of the simplified capitalized earnings method?
According to the IDW, the current capitalization factor leads to an unrealistic overvaluation of business assets and therefore to inaccurate results. The IDW is consequently calling for a significant reduction of the factor to ensure an appropriate valuation.
As of: August 2016
Why does the OECD criticise reduced VAT rates?
According to the OECD, reduced VAT rates—for example for hotels, restaurants, theatres or cinemas—primarily benefit higher earners, who use such services more frequently. From a distributional perspective, the OECD therefore considers these tax breaks problematic.
As of: December 2014
Why did the tax office reject the deduction of donations to the school support association as tuition fees?
The tax office argued that the payments to the support association were not made exclusively for school attendance, but also covered events, study trips and school field trips. Such services were not covered by the tuition fee definition under § 10 Abs. 1 Nr. 9 EStG. The Finanzgericht Münster rejected this narrow interpretation.
As of: February 2024
Why is the tax allowance worthwhile compared to a refund via the tax return?
Without a registered allowance, overpaid wage tax is only refunded after submitting the income tax return in the following year and after processing by the tax office. With a registered allowance, you benefit immediately every month from a higher net salary. This provides a liquidity advantage throughout the entire year.
As of: February 2014
Why does the property tax (Grundsteuer) in Germany have to be reformed?
In April 2018, the Federal Constitutional Court (Bundesverfassungsgericht) ruled that the previous property tax was unconstitutional because it was based on outdated assessed values (Einheitswerte). In the former West German states, these values date back to 1964, and in the former East German states even to 1935. The legislator had to enact new rules by the end of 2019; otherwise, property tax could no longer have been levied.
As of: August 2019
Why did the inheritance tax need to be reformed in 2016?
In 2014, the Federal Constitutional Court ruled that the previous privileges granted to heirs of businesses were too far-reaching and violated the principle of equality. The legislature was required to enact a constitutionally compliant new regulation by 30 June 2016.
As of: September 2016
Why do employment contracts for mini-jobs need to be adjusted?
For employees in marginal employment (Minijob), the contract must be adjusted so that the higher hourly wage does not push earnings above the marginal earnings threshold. As a rule, the agreed monthly working hours must be reduced in order to maintain the mini-job status.
As of: June 2016
Why must employment contracts be adjusted when the minimum wage is increased?
Raising the hourly wage to EUR 8.84 may cause existing employment contracts to exceed statutory pay thresholds. This is particularly relevant for marginally employed staff (Minijobs), where contract adjustments — such as reducing working hours — are essential to ensure the EUR 450 monthly threshold for marginal employment is not exceeded.
As of: July 2016
Why do tax advisory firms participate in professional and quality tests conducted by the press?
Such tests serve as a self-assessment of professional standards and enable an objective comparison with other firms. Since know-how and intellectual work are key production factors in tax consulting, it is important for firms to know where they stand in terms of quality.
As of: August 2009
Why does the legislator classify initial vocational training costs as special expenses (Sonderausgaben)?
Initial vocational training is regarded as a basic prerequisite for personal lifestyle and provision for one's own livelihood. It conveys not only professional knowledge but shapes the individual as a whole and is typically still covered by the parents' maintenance obligation. For these reasons, it is deemed to be of mixed (private and professional) origin.
As of: February 2020
Why is the Federal Constitutional Court reviewing the relief rules for business assets?
The BFH considers the inheritance tax preferences for business assets to be unconstitutional and referred the matter to the Federal Constitutional Court by order of 27 September 2012 (Az. II R 9/11). Doubts arise above all regarding compatibility with the principle of equality, as no comparable relief exists for private assets. Pending the decision, the tax authorities are assessing inheritance tax only on a provisional basis for valuation dates from 1 January 2009 onwards.
As of: August 2014
Why does the advertising imprint not qualify as consideration for the calendar?
The advertising effect achieved by distributing the calendar does not legally qualify as consideration provided by the recipient. The recipient does not render any service in return but merely accepts the calendar free of charge. As a result, the transaction remains a unilateral, gratuitous benefit that must be classified as a gift.
As of: July 2016
Why is continued personal use as a usufructuary not sufficient to preserve the tax exemption?
The overall structure of § 13 Abs. 1 Nr. 4b ErbStG shows that the tax exemption is tied to the acquisition of ownership and the ongoing position as owner. This connection is already evident from the rule that the exemption lapses if the property is transferred onward due to an obligation imposed by the testator or for purposes of estate division. Mere use as a usufructuary is therefore not enough to maintain the tax exemption.
As of: November 2016
Why are shoes considered part of women's fashion not deductible as work-related expenses?
Shoes that generally belong to women's fashion can equally be worn for private occasions. An objective distinction between work-related expenses and costs of private living is therefore not possible, so a deduction as work-related expenses is excluded under § 12 Nr. 1 EStG.
As of: August 2015