Germany: Application of trade tax addition to advertising expenses, tax policy implications of Parliamentary elections, other tax developments

The Federal Tax Court (BFH) held in two recent decisions (III R 36/22 dated September 16, 2024, and III R 33/22 dated October 17, 2024) that the taxpayers’ advertising expenses were subject to trade tax addition only to the extent such expenses were specifically for advertising space (and thus considered rental expenses), rather than for advertising services.

In addition, following the breakup of the coalition government in November 2024, early elections to the lower house of Parliament (Bundestag) took place on February 23, 2025. According to the preliminary results, a coalition between the Christian Democratic Union/Christian Social Union and Social Democrats is possible. In addition, The Greens, The Left, and the Alternative for Germany will be represented in Parliament and are therefore eligible for coalition negotiations. The parties have each presented core statements on plans for tax policy.

Read a March 2025 report prepared by the KPMG member firm in Germany

Other recent tax developments in Germany include:

• The BFH held that the extended trade tax deduction is not allowed if the entire property is sold during the tax period (October 17, 2024, decision – III R 1/23).
• The Federal Ministry of Finance (BMF) published the current status of income tax treaties and treaty negotiations as of January 1, 2025.