Online message – Monday, February 19, 2024
Corporate tax | Judge’s submission on Section 32a Paragraph 1 Sentence 2 KStG rejected (BVerfG)
The BVerfG has rejected as inadmissible a judge’s proposal for the retroactive application of Section 32a Paragraph 1 Sentence 2 KStG to tax assessments that had already expired when it came into force (BVerfG, decision of December 18, 2023 – 2 BvL 7/16).
background: With effect from December 19, 2006, the JStG 2007 introduced correction regulations with Section 32a KStG, which, among other things, are intended to ensure that a VGA is not only recorded unilaterally by the company or the shareholder (Section 32a Paragraph 1 KStG). If the company’s corporation tax assessment is changed in relation to a vGA, the shareholder’s income tax assessment may also be adjusted accordingly. This also applies if the income tax assessment was already final when the corporate tax assessment was changed. Section 32a KStG applies for the first time if a tax assessment has been issued, repealed or changed after December 18, 2006. The period for determining the income tax assessment does not end before the end of one year after the corporation tax assessment becomes incontestable.
Facts and procedure: The couple suing in the main proceedings acquired a developed piece of land in 1998 together with a GmbH in which they each held a 50% stake. In this context, the tax office discovered hidden profit distributions. In 2008 it changed the GmbH’s corporation tax assessment and the couple’s income tax assessment for 1998; In accordance with Section 32a Paragraph 1 Sentence 2 KStG, it took into account the hidden profit distributions as income. When Section 32a KStG came into force, the couple’s 1998 income tax assessment was already statute-barred. After their largely unsuccessful objection to the changed income tax assessment, they filed suit with the tax court. The FG of the first instance considers the regulation of Section 32a KStG to be partially unconstitutional. It therefore suspended the proceedings and submitted the question to the BVerfG for a decision as to whether the correction provision of Section 32a Paragraph 1 Sentence 2 KStG as amended by the JStG 2007 v. December 13, 2006 in conjunction with Section 34 Paragraph 13c KStG as amended on October 10, 2007 is compatible with the Basic Law insofar as it also applies to tax assessments of the shareholder for which the assessment period had already expired at the time the regulation came into force (FG Cologne, decision of . April 20, 2016 – 4 K 2717/09, see our online message from May 18, 2016).
The BVerfG judges rejected the judge’s submission as inadmissible:
Based on the Finance Court’s opinion that the application of § 32a KStG to income tax assessments that were already statute-barred at the time of its entry into force creates an unjustified genuine retroactive effect, a constitutionally compliant interpretation suggests itself, which does not appear to be ruled out.
An interpretation that excludes disadvantageous changes to tax assessments that have expired could take the prohibition of retroactivity into account.
However, the tax court did not sufficiently explain why it does not consider a constitutional interpretation to be possible.
Those: BVerfG,
Press release from 2/13/2024 (il)
Location(s):
NWB JAAAJ-59695