On Thursday 14 November, the European Commission decided to refer Germany to the Court of Justice of the European Union for failing to eliminate the discriminatory tax treatment of reinvested capital gains on the sale of German property.
According to the Commission, this treatment is “the infringement of the free movement of capital”. Germany grants a tax deferral for reinvested capital gains made on the sale of real estate located in Germany, provided that this real estate has been attributed to the fixed assets of a domestic permanent establishment for an uninterrupted period of at least six years.
Companies established in Germany, even if they do not carry out a business activity there, are deemed to have such a permanent establishment at their place of management, whereas comparable companies established in other EU/EEA Member States are deemed not to have such permanent establishments in Germany. As a result, Germany is refusing to grant them tax deferral on reinvested capital gains from the alienation of German property. The Commission considers that “the efforts made by the German authorities have, to date, been insufficient” and is therefore referring the matter to the CJEU. (Original version in French by Anne Damiani)