Germany: Treaty override under constitutional attack again
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Germany: Treaty override under constitutional attack again



Petra Peitz-Ziemann

Erik Muscheites

The treaty override provisions of the Income Tax Act make an exemption of, among others, employment income conditional on full taxation or conscious waiver of taxation in the other state. However, exemption from taxation in the other state by reason of non-resident status there or qualification conflict on the type of income is not a conscious waiver. This latter tightening in the law was introduced in 2013 but with retroactive effect as it was a mere "clarification" of a previously "unclear" legal provision. However, the Supreme Tax Court had already ruled – before this clarification – that the treaty override was, unless specifically provided for in the treaty, in breach of the treaty and therefore of international law. As such it was unconstitutional. That case concerned a German resident pilot of an Irish airline whose salary was exempt in Germany under the aircrew provision of the treaty and exempt in Ireland in the hands of a non-resident (Irish law has since been changed for non-resident aircrew). The court laid the question before the Constitutional Court, which has not yet responded. The Supreme Tax Court has now heard a further case on the same issue, brought, again, by a German resident pilot of an Irish airline. On October 15, it published its resolution to lay again the same question before the Constitutional Court. This time, though, it now has occasion to call the retroactive application of the 2013 clarification into constitutional question. It sees the change as a change in substance to the disadvantage of taxpayers affected. As such, it cannot be applied retroactively.

As further cases on the constitutional position of unilateral treaty override clauses are pending, we recommend those affected to appeal against their tax assessment notices. If nothing else, this will serve to keep their positions open until the Constitutional Court has handed down a ruling.

Petra Peitz-Ziemann ( and Erik Muscheites (


Tel: +49 69 9585 6586 and +49 69 9585 3628


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