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Consideration of losses for sale of shares

The introduction of the flat rate withholding tax on capital gains on 1 January 2009 has led to a regime change in the tax treatment of the asset base. Since then, sales profits from securities transactions are generally subject to a broad withholding tax deduction. By contrast, the tax treatment of sales losses has yet to be fully resolved. In particular, the tax authorities do not recognize losses in certain cases. Hitherto, this even applied to such cases in which the sales proceeds from a securities transactions were less than the transaction costs and generally pertained to (virtually) all shares that had become worthless. The Federal Finance Court has now established an important principle in favor of affected taxpayers. According to this ruling, losses that taxpayers suffer from the cancellation of capital claims to which they are entitled are tax deductible in future.

In the underlying case at the Federal Finance Court (case number BFH VIII R 32/16), ordinary bearer shares were acquired at a purchase cost of about EUR 5,800 and later sold to a savings bank at a selling price of EUR 14 in total. The savings bank retained transaction costs of the same amount (EUR 14). After the tax authorities failed to recognize the incurred losses equivalent to the purchase cost, the affected taxpayer brought an action before the Finance Court of Lower Saxony and won. The Federal Finance Court concurred with the view of the Finance Court of Lower Saxony. It stated that in this case neither was a loss statement from the bank required nor had the taxpayer fraudulently broken the law by selling his shares at a loss.

The ruling by the Federal Finance Court is likely to have far-reaching consequences because losses arising from the cancellation of capital claims
have been recognized by the the supreme court for (withholding) tax purposes for the first time. The first gratifying aspect about the ruling is that the Federal Finance Court clearly rejected the accusation by the tax authorities that the taxpayer was deliberately committing an abuse of structural alternatives by claiming losses. But another positive aspect from the taxpayer standpoint is that in future a loss statement from the bank is no longer required in order to be able to set losses off against tax. However, other outstanding questions in connection with the treatment of losses under the withholding tax regime remain unresolved. Affected taxpayers should therefore in corresponding cases seek professional assistance and discuss the prospects of success for an appeal against tax assessments that reject their claims.


Dr. Herbert Buschkühle is an attorney-at-law/tax advisor/notary public/ specialist attorney for tax law/specialist attorney for inheritance law at PKF WMS Dr. Buschkühle PartG mbB Rechtsanwälte Steuerberater, co-operation partner of PKF WMS Bruns-Coppenrath & Partner mbB Wirtschaftsprüfungsgesellschaft Steuerberater Rechtsanwälte (member company of the PKF network).

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