In addition to domestic legislation, the German legislature also has the right to tax foreign income in many cases. This can result, for example, from a double taxation agreement (DTA) and regularly poses a problem for the tax authorities. Because those who tax foreign positive income must also allow negative income (losses) from abroad to be deducted. With § 2a EStG, the German legislature tries to contain this legal concept developed by the BFH in certain places. Negative income related to third countries can only be used in Germany under certain conditions.
1. background and purpose of § 2a EStG
According to the original explanatory memorandum, § 2a EStG was established primarily with the prevention of abuse possibilities. Taxpayers who, from the point of view of the legislature, are pursuing an “economically unreasonable” activity, but have been able to achieve considerable tax savings as a result, should be able to claim corresponding losses only partially or not at all in Germany.
However, the application of § 2a EStG is nevertheless precluded by § 2 AO. This is because agreement-related regulations – in particular double taxation agreements (DTAs) – fundamentally take precedence over national law. They therefore lead to a complete or partial inapplicability of the standard.
Numerous decisions of the Bundesfinanzhof (BFH) also show the reason for this. Because if the German legislator wants to tax positive income from third countries, he must also consider negative income. If he did not do so, there would be an unconstitutional discrimination against individual taxpayers. § 2a EStG therefore restricts the possibility of offsetting corresponding income, but does not completely exclude it.
2. negative income related to third countries within the meaning of § 2a EStG
With § 2a EStG, income tax law contains a standard that partially restricts the domestic exploitation of negative foreign income if it comes from third countries. It should be noted, however, that the provision is limited to certain income. This includes losses according to § 2a (1) sentence 1 EStG
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.