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European Commission

Press release

Brussels, 27 September 2012

Taxation: Commission refers Germany to Court over discriminatory tax rules on hidden reserves

The European Commission has decided to refer Germany to the EU's Court of Justice over its discriminatory tax rules on the reinvestment of hidden reserves. Under German legislation, hidden reserves can only be transferred tax-free into a reinvestment if the newly purchased assets belong to a permanent establishment in Germany. In practice, this means that a taxpayer wishing to sell certain fixed assets in order to establish himself in another EU Member State, or to expand his business activities abroad, will clearly be at a disadvantage. This unequal treatment can discourage cross-border investments, and its discriminatory nature is contrary to EU rules.

The referral to the Court of Justice is the last step in the infringement procedure.


German rules allow taxable persons to transfer hidden reserves, tax-free, from sold assets to other newly purchased assets. This transfer of hidden reserves can take place in two ways. First, the taxable persons can deduct the capital gains from the new assets during the business year in which the sale took place. Second, the taxpayer can create a reserve to reduce his profit and transfer this to assets he procures during the next four or six business years. However, this is only possible if the new assets are reinvested in a German permanent establishment. If the new assets are reinvested in a foreign permanent establishment, the hidden reserves cannot be transferred and are thus taxed immediately.

For press releases on infringement cases in the taxation or customs field see:

For the latest general information on infringement measures against Member States see:

For more information on EU infringement procedures, see MEMO/12/12 and MEMO/12/708 regarding the September infringement package decisions.

Contacts :

Emer Traynor (+32 2 292 15 48)

Natasja Bohez Rubiano (+32 2 296 64 70)

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