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Germany: Treaty override declared constitutional


Alexander Linn

Thorsten Braun

In a decision dated December 15 2015 (and published on February 12 2016), Germany's constitutional court (BVerfG) confirmed that the legislature can enact tax treaty override provisions that aim to secure Germany's taxation rights, despite treaty provisions to the contrary.

Tax treaties in Germany are not 'self-executing'. For a tax treaty to become applicable, it must be transposed into German domestic law, which requires the consent of both the upper and lower houses of parliament. Once transposed, a treaty will have equal status with 'ordinary' domestic tax law; in other words, the treaty will not supersede ordinary domestic law, or vice versa. Despite this equality of status, there was some discussion in German literature if the constitution, interpreted in consideration of international law, could prevent the legislator from overriding a tax treaty, at least in specific circumstances. The federal tax court (BFH) referred a case to the constitutional court in 2014, where a domestic rule denied a taxpayer the exemption from German tax foreseen under the applicable tax treaty if the taxpayer failed to provide proof that the other state either did actually tax the relevant (employment) income or voluntarily waived its right to tax such income.

In its decision, the constitutional court makes a detailed analysis of the relationship between tax treaties and ordinary domestic law and concludes that tax treaties do not rank superior to ordinary domestic law. For ordinary domestic law, however, the lex posterior derogat legi priori principle (a later law prevails over an earlier law) applies, which means that the legislator can unilaterally introduce rules that deviate from earlier provisions in a tax treaty. Several other cases with other treaty overriding provisions are pending and the BVerfG is expected to come to similar conclusions, highlighting the need to consider domestic tax law of Germany as a treaty partner.

Alexander Linn ( and Thorsten Braun (


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