Tax on futures transactions is unconstitutional!
Germany’s highest tax court, the Federal Fiscal Court (BFH), has ruled that the limited tax offsetting of losses from forward transactions is unconstitutional. This decision, published on June 27, 2024 (case number VIII B 113/23), has far-reaching consequences for investors.
Background to the regulation
Since 2021, losses from forward transactions, options, futures and CFDs can only be offset against tax up to EUR 20,000 per year. Higher losses may only be offset against similar gains in subsequent years. This regulation means that investors have to pay full tax on their gains, while their losses are only taken into account to a limited extent.
Violation of the principle of equality
The BFH sees this as a violation of the principle of equality in the German Basic Law. Investors are treated unequally, as gains may be offset without restriction, but losses may only be offset to a limited extent. The court emphasizes that there are no objective justifications for this unequal treatment.
Effects on the taxation of share losses
The ruling not only affects forward transactions, but could also have an impact on the taxation of share losses. The BFH has already submitted a referral to the Federal Constitutional Court in 2021 (2 BvL 3/21). The supreme constitutional judges must now decide whether these regulations will stand.
Legal protection for investors
The ruling is good news for investors. They can now suspend the enforcement of their tax assessments because there are serious doubts about the admissibility of the tax claim. Investors can do this by lodging an appeal against the tax assessment at the same time.
Have you made losses from shares, futures and the like? And do you want to offset them against your profits? Then use the PepperPapers sample objections for the objection to the limit on offsetting losses for forwards, options, futures and CFDs and for the objection to the prohibition on offsetting share losses.
