Elimination of the requirements for the partial income method option

Once an effective application has been submitted, the partial income method must also be applied in the following four years, even if the requirements have already ceased to apply after the first year.

Under certain conditions, the partial income method can be chosen instead of the flat-rate withholding tax for income from an investment in a corporation. According to the law, the application for the partial income method also applies to the following four assessment periods - as long as it is not revoked - without the application requirements having to be proven again. The Federal Fiscal Court has once again confirmed that the tax office must assume that the application requirements are met in the following four assessment periods, even if these have ceased to apply in the meantime, for example because the shareholding in the corporation has since been reduced or sold.

The tax authorities wanted the regulation to be understood in such a way that the tax office merely waives the constant proof of the requirements, but can refuse the partial income procedure in a later calendar year if the requirements have ceased to apply in the meantime. The Federal Fiscal Court had already contradicted this interpretation in a ruling from December 2023 and is upholding its legal opinion in two recent rulings. In one of the current proceedings, the plaintiff can therefore still claim interest on debt for the acquisition of the share as subsequent income-related expenses under the partial income method in the years following the sale of the GmbH share.