In 2005, Steel Construction GmbH and a Polish subsidiary agreed on a debt write-off, which Steel Construction GmbH deducted for tax purposes.
However, the tax authorities issued an assessment denying the write-off as a tax-deductible expense. According to the tax authorities, independent third parties would have agreed to some form of security, and the absence of this was a violation of the arm’s length principle.
“Steel Construction GmbH” brought the assessment to court, and in February 2019 the Federal Fiscal Court (I R 73/16) ruled that the tax authorities’ assessment was lawful.
This decision was appealed to the Constitutional Court, where Steel Construction GmbH alleged a violation of the general principle of equality, as well as a violation of its fundamental procedural rights.
Decision
The Constitutional Court ruled that the complaint was inadmissible because it lacked the necessary constitutional substantiation.
According to the court the complaint lacked the necessary constitutional substantiation. The complainants had not demonstrated in a coherent, constitutionally grounded way how the decision violated the principle of equality or any other fundamental right. Their arguments remained at the level of general legal disagreement with the interpretation of the Foreign Tax Act, failing to address the constitutional standards required for a successful challenge. The decision of the Federal Fiscal Court was therefore final.
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