In its decision dated April 24, 2024 (I R 41/20), the Federal Fiscal Court (BFH) decided for the legal status up to December 31, 2021 that exchange rate losses from loans granted by a substantial shareholder (>25 %) are not tax-deductible.
The BFH states that the prohibition of deduction pursuant to Section 8b (3) sentence 4 (German) Corporation Tax Act (KStG) also applies to exchange rate losses from a receivable granted to a subsidiary in a third country. The decisive factor for the senate is the broad wording of the provision, which is to be applied indiscriminately to all reductions in profits, taking into account the explanatory memorandum to the law.
Neither the purpose of the law nor constitutional law justifies a different result, as Section 8b (3) sentence 4 KStG is intended to deny a loss recognition for shareholder loans in line with the treatment of losses for equity participations. In the opinion of the BFH, the decision is also in line with EU law. This is because the freedom of movement of capital is ultimately superseded by the freedom of establishment, as the prohibition of deduction requires a shareholding of 25%.
The decision is relevant to assessment periods up to 2021; with effect from January 1, 2022 onwards; the legislator has expressly excluded exchange rate losses from the deduction prohibition in Section 8b (3) sentence 6 KStG.
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