German participation exemption (§ 8b Abs. 5 KStG) and treaty-exempt permanent establishment profit

Does the add-back under Section 8b of the German Corporate Income Tax Act apply where dividends, capital gains or value write-ups form part of the profits of a foreign permanent establishment that are exempt under a double tax treaty?

In their latest case note in IWB No. 17, Dr. Dirk Pohl and Annette Keller critically examine the final judgment of the Münster Fiscal Court dated June 23, 2026. They explain why the non-deductible business expenses deemed to arise under Section 8b KStG form part of the permanent establishment profits exempt under the applicable double tax treaty, meaning that the add-back should not apply, contrary to the Münster Fiscal Court’s view. They also outline the practical implications for affected companies.

Read the full (German) article here.