Until the year 2001 German investors could credit the corporation tax paid by their company against their own shareholder’s income tax only in those cases in which these companies were based in Germany. Against this legal action was brought by the heirs of an investor at a tax court in Cologne. The Cologne court passed this case on to the European Court of Justice in Luxembourg. Today the verdict was pronounced: a taxation which various depending on where a company is based is illegal and violates the free movement of capital in the EU.
The verdict contains a line which will cost the German Federal Ministry for Finance billions of Euros: “The court, however, has not limited the effect in time of the verdict in the Verkooijen case”. This is to say that the verdict comes with retroactive effect which means that tax already paid will have to be paid back. All in all the Federal Ministry for Finance expects repayments amounting up to five billion Euros. So far the Ministry has not yet commented on this.