On 2 July 2026, the Federal Fiscal Court published five new rulings which may be of considerable significance to property owners, businesses and tax advisers. An overview of the key issues.
The Baden-Württemberg Property Tax Act is constitutional
Two judgements dated 22 April 2026 (Case Nos. II R 26/24 and II R 27/24) deal with the Baden-Württemberg State Property Tax Act. In these judgements, the Federal Fiscal Court (BFH) confirmed that the Act is compatible with the Basic Law both in form and substance. Baden-Württemberg had made use of the so-called ‘opening clause’ in the Basic Law and introduced its own property tax based exclusively on land value. Unlike the federal model, the value of buildings standing on the land plays no role here.
Specifically, the Federal Fiscal Court (BFH) clarified that the standard land value may be applied on a flat-rate basis to all plots of land within a standard land value zone. Anyone wishing to claim a lower value must meet the strict legal requirements set out in Section 38(4) of the Baden-Württemberg Land Tax Act (LGrStG BW). A general reference to the specific characteristics of one’s own plot of land is not sufficient. Property owners in Baden-Württemberg who have challenged their property tax assessment should keep an eye on these rulings and, where necessary, seek tax advice.
Inclusion of provisions for fines in business valuation
The judgement of 25 March 2026 (Case No. II R 17/23) concerns the simplified income approach, which is used when valuing businesses, for example for the purposes of inheritance or gift tax. The Federal Fiscal Court (BFH) ruled that expenses arising from a provision for a fine under competition law must be added back to the relevant base value if the fine is exclusively punitive in nature. Such extraordinary expenses should not permanently reduce the tax valuation result. In the context of business succession and gifts, this can have a significant impact on the valuation basis and, consequently, on the tax liability.
Trusts and Land Transfer Duty in Partnerships
The judgement of 25 March 2026 (Ref. II R 30/25) clarifies a practical issue concerning fiduciary relationships in the context of partnerships that own land. Where a partner holds their share in trust for a third party, the property remains, for tax purposes, part of the partnership’s assets. The mere existence of a trust agreement relating to the partnership share does not, in itself, give rise to a chargeable event for the purposes of land transfer tax. However, the subsequent transfer of the share from the trustee to the settlor may, under certain conditions, fulfil the criteria set out in section 1(2a) of the Land Transfer Tax Act (GrEStG) and thus trigger land transfer tax. Anyone who holds or plans to hold shareholdings in property-owning companies via trust arrangements should have the tax implications carefully assessed.
Electronic submission of pleadings: taking formal requirements seriously
The judgement of 24 February 2026 (Case No. VII R 34/24) is more focused on procedural law. It concerns the requirements for the electronic submission of pleadings to tax courts. A simply signed pleading submitted via an unauthorised transmission channel does not satisfy the statutory formal requirements. Whilst courts are obliged to draw attention to easily identifiable formal defects and to allow for rectification within the current time limit, However, if one relies on an unauthorised transmission channel, one risks losing the right of appeal. Particularly in ongoing tax or fiscal court proceedings, it is essential to ensure that electronic submissions are made in the correct form.
The following applies to all the decisions mentioned: the specific implications depend on the individual case. It is advisable to seek personalised tax advice.
Source: Haufe: Tax
This article was created with the help of AI and has been editorially reviewed.
