EU Commission takes Germany to court over capital gains tax deferral

The European Commission is taking Germany to the European Court of Justice (ECJ) for an allegedly discriminatory tax regime.

The case concerns the tax treatment of capital gains from the sale of real estate in Germany, the Brussels authority announced on Thursday.

Germany currently grants tax deferral for profits from the sale of real estate if these are reinvested in new assets – but only if the property can be assigned to a domestic permanent establishment.

Companies established in Germany are assumed to have such a branch, even if they do not trade in Germany. However, companies from other European countries that sell real estate in Germany only receive this tax deferral if they are also assigned a permanent establishment in Germany.

According to the statement, the commission believes that this regulation violates EU rules on the free movement of capital. Talks on the issue were initiated with the German authorities in 2019, but in the view of the commission Germany’s efforts to find a solution to the issue have not been sufficient.