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Questions which are frequently asked with reference to fiscal law issues

Does the electronic filing of tax returns make sense, in particular as far as the use of the ElsterOnline method is concerned?

This form of filing tax returns is increasingly pushed ahead by the revenue authorities and it is also to be advocated under technical development and process-simplifying aspects.

It is yet to be noted that this type of proceeding is susceptible to misuse.


Normally the signature on the „normal“ official tax return form gives rise to the allocation of the tax return to the person of the signatory. The actual commitment will then only become binding if and when the form has the respective person’s holographic signature on it.  


In order to ensure that this attains the quality of a document in legal terms it is a requirement that the issuer of the tax return can be recognized. When using the electronic way of filing this is also possible without a signature in line with the provisions of Section 87 a of the German Tax Code if the electronic document is provided with a qualified electronic signature so that the declarant can be identified. When the ElsterOnline method is used the requirement of this signature is waived. 


All the taxpayer has to do is to enter his or her name via the ElsterOnline Portal, and his or her identity is checked. Following that he or she will receive an authentification certification by means of which he or she can transmit his or her tax return. The only thing which is verified by this process is from which computer the tax return is communicated and whether it is allowed to send the tax returns to the internal revenue office from this computer.


This means to say that it is not the declarant but rather the sender who becomes recognizable so that misuse with the currently used procedure cannot be altogether excluded. 

Does the levying of German real estate transfer tax for future building work projects for the so-called uniform object of performance e.g. in sales contracts and in building construction contracts, break European laws?

In this respect it is to be noted that some of the German land transfer tax provisions are currently being „put on a test“ under the viewpoints of European law.  

It was with its Ruling of 02 April 2008, file No. 7 K 333/06, that the Fiscal Court of Lower Saxony submitted the following question to the European Court of Justice:


„Does the levying of the German land transfer tax for future building work as a result of the inclusion of the same in the taxable amount for real property transfer tax on the occasion of the acquisition of a still vacant piece of land (so-called uniform or single subject item comprising building work as well as the acquisition of the land) contravene the European prohibition of multiple turnover taxation specified in Article 401 of the Value-Added Tax System Directive (formerly: Art. 33 section 1 of the 6th EC Directive) if the building work which is thus subject to the payment of land transfer tax is at the same time also subject to German turnover tax as a subject item in and by itself.“


The case concerning the Court’s question is pending with the European Court of Justice as case C-156/08.


It was with identical ordinances which were passed by the supreme finance authorities of the German „Länder“ on 23 July 2008 (published in Federal German Tax Gazette, Part I  2008, p. 812) that it was ruled that a notice of provisional assessment status is to be included in the land transfer tax assessments in view of this open question of law which remains still unanswered in consideration of the above-referred-to proceedings which are still pending before the European Court of Justice. A suspension of execution of the same under Section 361 sub-section 2 of the German Fiscal Code and/or Section 69 sub-section 2 of the German Code of Prodedure for Fiscal Courts, is, however, refused.


For future tax assessments it is recommended to check whether land transfer tax assessments actually do contain this notice of provisional status if such a situation is faced with.


If this is so, the amendment of the respective assessment will be made on an ex officio basis if and in so far as the European Court of Justice will answer the question which was submitted to it by the Fiscal Court of Lower Saxony in the affirmative.


 If this is not so, it is recommended as a matter of precaution for the person or party to whom such a tax assessment has been addressed, to file an objection, with reference to be had to the C-156/08 case which is pending before the European Court of Justice and which brings up the question of a verification of applicable provisions to determine whether they are in conformity with higher-ranking legislation or jurisdiction.



Is it as of now still possible to benefit from the formerly granted „Eigenheimzulage“, i.e. a special subsidy for owner-occupied homes?

The subsidy for owner-occupied homes was abrogated with effect as from 01 January 2006 on.


In the case of homes the planning and building of which (filing of an application for a building permit) was begun prior to 2006 or which were acquired by virtue of a validly concluded contract still prior to 2006, it is still possible to benefit from this subsidy.


In this respect it is an important prerequisite that the sum of the entirety of the positive income achieved during the first and the previous year must as a matter of principle not exceed 70 000.— EUR for unmarried single persons and 140 000.— EUR for spouses. The first year is the firstyear of the eight-year period during which the subsidy may be granted, when all of the prerequisites for the right to this owner-occupied home subsidy were met for the first time. 


The basic annual amount which is granted as a subsidy is 1% of the assessment basis (purchase or planning and building costs), the maximum being 1.250,00 EUR. The additional children’s allowance is 800,00 EUR p.a. for every child who is to be taken into account.

What are the requirements which have to be complied with when keeping a driver’s logbook if one wishes to determine the actual costs of the extent of the private use of a car (non-cash benefit of a use of a company car) not according to the so-called 1 %

In the first place it is required that all expenses which are incurred for the motor vehicle concerned be proved by documentary evidence. These expenses are then split according to the ratio of the private to the work- or business-related use*) of the vehicle.


The ratio of the work - or business-related use to the private use of the vehicle must be proved by a properly and precisely kept driver’s logbook, in which context it is to be noted that the requirements stipulated by jurisprudence are very strict (Judgment of Federal German Federal Fiscal Court dated 16 March 2006, file No. VI R 87/04).


► Work- or business-related vehicle use must be evidenced separately  and continuously in the driver’s logbook


► The driver’s logbook must be kept in an orderly, updated and compact form (MS-Excel data file is not permitted, Federal German Fiscal  Court, 16 December 2005, file No. VI R 64/04)


► As far as work- or business-related vehicle use is concerned it is required to provide the following pertinent information:


► Date and kilometrage at the beginning and at the end of every single out-of-town work performance (official or business trip, alternating job assignments, regular job assignments which require regular traveling)


► Indication of destination and also traveling route in case of necessary detours


► Purpose of travel and business partner(s) visited


► As far as private vehicle use is concerned it is sufficient to indicate the  respectively traveled kilometers; for traveling between home and workplace it is sufficient to make a short respective note in the driver’s logbook.


If the logbook does not comply with these requirements it is regularly rejected by the Internal Revenue Authorities and taxes are mandatorily imposed in line with the 1% rule.

Can „household-related services“ also be taken into account as tax-reducing deductible expenditures when it comes to those expenses which are to be alotted to a condominium owners community ?

This question is presently controversially discussed. German internal revenue authorities hold the opinion that expenses for household-related services, the orders for which are given by a community of condominium owners cannot be claimed as tax-reducing deductibles by the owners of the apartments.


The Fiscal Court of Baden-Wuerttemberg holds a different opinion (Judgment dt. 17 May 2006, file No. 13 K 262/04) and permits a (proportional) fiscal deduction. In view of this Judgment which has not yet been confirmed by a higher-ranking Court it is recommended that the deduction of such proportional costs be applied for and that the filing of an objection should be considered if internal revenue authorities issue notices of rejection. 

From when on is or was it that the new increased turnover tax rate of 19% was or is to be applied?

The presently applicable general turnover tax rate of 19% is to be applied for all deliveries, other services,  private or a company’s own consumption and intra-community acquisitions which are or were effected after the 31st of December 2006. In this context the decisive date is always the date on which the respective turnover was made, i.e. for example


► the time of delivery: with the procurement of the power of disposition  (physical delivery)


► in the case of shipment or transport of a merchandise or product : with the commencement of the transport


► in the case of work delivery or work performance : with the completion of the work, and/or its acceptance by the vendee


► in the case of continuous work or service performance : with the end of the agreed-upon service period .



It is to be noted that the date when an order was placed, when the invoice was written, or when the compensation was received is not a decisive criterion.


Thus the specification of the performance or service period in the invoice has to be attributed special significance for the reason that there must be no inconsistencies when it comes to the tax rate which is to be applied.


Special accounting provisions apply for down-payments, advance invoices, in the case of actual receipts taxation, in the case of partial performances, bonuses, discounts, rebates, and for the possibility of turnover tax increase shiftings, with respect to which it is recommended to obtain pertinent legal counsel.