Germany: Federal Tax Court Closes Loophole in Germany–Luxembourg Tax Treaty

Abstract

In its decision of 4 July 2008, BFH v. 4 July 2008, Case I R 62/06. the Federal Tax Court (Bundesfinanzhof, BFH) held that the income of a German limited liability company derived from a participation as a typical silent partner of a Luxembourg company is not exempt in Germany in accordance with the Germany–Luxembourg tax treaty. Germany–Luxembourg income and capital tax treaty, signed 23 August 1958. In this note, the author considers the Federal Tax Court’s decision.