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The Federal Tax Court in February 2025 issued a decision concerning interest on withholding tax on dividends not refunded in breach of EU law. The court held that interest must be paid on dividend withholding tax refunds under EU law if the Federal Central Tax Office withholds such refunds without indications of an abusive arrangement.

This decision clarifies the obligation under EU law to pay interest on refunds of dividend withholding tax, which contrasts with unilateral German law where no interest is payable on such refunds. The decision emphasizes that the withholding of refunds based on national regulations contrary to EU law warrants interest payments, aligning with established CJEU case law.

Read a prepared by the ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø member firm in Germany

Other recent tax developments in Germany include:

• Coalition agreement for a new federal government: Tax policy measures include reducing corporate income tax and introducing an investment booster.
• Federal Tax Court (I R 23/21): Managing holding company can act as a controlling company of a tax group for corporate income tax purposes without additional commercial activities.
• Federal Tax Court (I R 45/22): The German Authorized OECD Approach (AOA) rule is an income correction rule, not a profit determination rule.
• Federal Tax Court (I R 47/21): In assessing the existence of a permanent establishment (PE), the permanent provision of personal use structures can be an indication of the existence of a permanent power of disposition over the business equipment.
• Federal Tax Court (I R 41/21): Parallel imports can lead to hidden profit distribution favoring the foreign parent company.