For editorial cut-off date, disclaimer, and notice of copyright see end of this article.
As an update, we note that the appeal of the judgement of 30 April 1997 of the Rhineland-Palatinate Tax Court (EFG 1998, 562; see KPMG German News no. 3/1998 at p. 22 = article no. 152;) was decided by the Federal Tax Court (FTC) in its judgement of 17 February 2000 (I R 130/97 – IStR 2000, 438).
The FTC affirmed the lower court's judgement and endorsed its reasoning. As a consequence, the income derived by the Luxembourg satellite operator was not taxable in Germany. The case involved the Astra 1 A satellite, which broadcast television programmes for reception in Germany.
The case turned on whether the satellite operator had leased a transponder for use by a German television broadcaster (causing the satellite operator to derive lease and rental income under § 21 EStG or "other income" under §22 EStG), or had obligated itself to provide satellite transmission services (causing the satellite operator to derive commercial business income under § 15 EStG). The high court agreed with the lower court that the contract involved the performance of commercial business services.
Subject to certain exceptions not presented by the case at hand, income from commercial business activity is not taxable in Germany unless derived through a German permanent establishment. Since the Luxembourg satellite operator had no permanent establishment in Germany, the FTC affirmed the lower court's holding that the income in question was not taxable in Germany under German domestic tax law.
The German nexus required to tax a non-resident's lease and rental income or "other income" is not as strict, hence the attempt by the tax authorities to characterise the income in question as falling into one of these categories. German tax law defines seven categories of taxable income in all.
Please see the article on the lower court decision for further detail.
Editorial cut-off date: 20 March 2002
Disclaimer and notice of copyright
This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. KPMG Germany in particular insists that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note that the article is current only through its editorial cut-off date shown immediately above (not to be confused with the later date as of which the article was placed online – the date appearing at the article's outset). Related developments subsequent to the editorial cut-off are not necessarily reported on in later articles. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While KPMG Germany's articles are carefully reviewed, it can accept no responsibility in the event of any inaccuracy or omission. Any claims nevertheless raised against KPMG Germany on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Germany (KPMG Deutsche Treuhand-Gesellschaft AG). No use of or quotation from the article is permitted without full attribution to KPMG Germany and the article's stated author(s), if any. Distribution to third persons is prohibited without the express written consent of KPMG Germany in advance.
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