Tax office rejects loss write-off? Appeal can help
Constitutional Concerns against Tax Rules: Some affected parties object due to the limited recognition of losses from capital assets. The judgments could also benefit others.
Anyone earning income from capital assets may incur losses under certain circumstances - for example, from selling stocks if the price has dropped in the meantime. Gains and losses can be offset to some extent. However, not all these offsetting limits are recognized by the courts. The Taxpayers' Union therefore advises affected parties to file a fundamental objection to tax assessments where the loss offsetting was not acknowledged.
One limitation: Losses from capital assets cannot be offset against income from other income types - for instance, loss-making stock sales cannot be offset against income from pensions or wages, which could reduce the tax burden. Instead, losses can only be deducted from capital income gains in the same year or in subsequent years. The Federal Finance Court had already expressed constitutional concerns about this regulation (Case VIII R 11/18). The Federal Constitutional Court has yet to rule on this matter.
Open Assessments can be amended
A somewhat more specialized and therefore likely only relevant to a few investors and investors: Losses from so-called futures contracts - i.e., stock exchange transactions whose fulfillment lies in the future - can only be offset against gains from futures contracts and the resulting premiums. Even offsetting with gains from other stock transactions is excluded here. Moreover, the deductible losses are limited to €20,000 per year. Those who have suffered greater losses must carry forward the remaining amount and again offset it up to the maximum limit in subsequent years.
The Federal Finance Court also raised constitutional concerns about this procedure (Case VIII B 113/23). A similar case is currently being heard by the Finance Court of Baden-Württemberg. The Taxpayers' Union assumes that the Finance Court will refer the contested issue to the Federal Constitutional Court for a decision.
Until there are final court rulings, taxpayers can keep their objection to the tax assessment open. The tax authorities can then still amend the assessment. If the assessment is legally binding, this is no longer possible. Taxpayers have four weeks from receiving their assessment to file their objection.
- The 'Association of Taxpayers' encourages affected parties with capital asset losses that were not acknowledged in tax assessments to file a guide from the Tax Office, citing the constitutional concerns raised by the Federal Constitutional Court in relation to the limited recognition of such losses.
- Investors who incur losses from stock trading, such as selling stocks at a lower price than originally purchased, may benefit from the judgments of the Federal Finance Court and the Federal Constitutional Court, which could potentially expand the recognition of loss offsetting limits.
- The 'Federal Finance Court' has expressed constitutional concerns about the regulation that limits the offsetting of losses from capital assets against income from other sources, like pensions or wages (Case VIII R 11/18), and also raised concerns about the procedure for offsetting losses from futures contracts against gains (Case VIII B 113/23).
- The 'Revenues' collected by the Tax Office can be significantly impacted by the court decisions regarding the recognition of losses from capital assets, impacting both investors and the overall tax system.
