Federal Constitutional Court: Legislator May Pass Tax Laws With Limited Artificial Retroactive Effect

In a decision dated 10 October 2012 published on Friday, the Federal Constitutional Court [Bundesverfassungsgericht, BVerfG] permitted the artificial retroactive effect of a tax law from the date after the adoption of the resolution by the Mediation Committee [Vermittlungsausschuss] (1 BvL 6/07). The decision also has substantial effects upon other cases and will serve as a standard for the legislator of tax law amendments. According to Gunnar Knorr of the law firm of Oppenhoff & Partner, in future, taxpayers will have to pay even greater attention to amendments of the law, especially at the end of the year.

The proceedings at issue concerned the inclusion for trade tax purposes of so-called dividends on diversified holdings. These dividends, which accrue to stockholders which only hold an insignificant participation (below 10%) in an enterprise, were not subject to trade tax for certain payments in the year 2001. However, through the Act on the Further Development of