Appeal to the Federal Fiscal Court

It is important to be aware, that the Federal Fiscal Court only rules on questions of the law and generally has no authority to make factual decisions. This means:

• The Federal Fiscal Court only determines, whether the previous decision by a Fiscal Court has correctly applied the law.
• The Federal Fiscal Court does not re-assess the factual issues of an individual case. It assumes and accepts the factual circumstances as they were determined by the preceding Fiscal Court.

This means, that the Federal Fiscal Court only has authority in respect of questions of law. Only Fiscal Courts have authority over both law and facts, because they assess legal and factual questions concurrently.

Example: The Fiscal Court assessed, that the claimant received €10,000 each month on his account and ruled, that these receipts constitute business income for taxation purposes. The Federal Fiscal Court would be generally bound by the assessment that €10,000 were received. It is however not bound by the legal assessment, whether these payments are business income or otherwise. This would be a question of law to be determined by the Federal Fiscal Court.

Note: Experienced legal representatives take due care, that the factual circumstances have already completely and accurately been determined by the preceding Fiscal Court. A later re-assessment (after annulment of the Fiscal Court’s judgement) is only possible in exceptional cases. The Federal Fiscal Court would only reject the preceding interpretation of facts by the Fiscal Court, if it was obviously arbitrary or other grave deficiencies in the investigations have surfaced.

It is important to note, that the Federal Fiscal Court cannot annul any and all judgements that suffer from legal deficiencies. A legal flaw must rather be significant and material (so-called appeal reason). In this respect, please compare with the following:

The prerequisites for an appeal are

• the Fiscal Court, as the preceding authority, has admitted the appeal against its judgement, or
• the Federal Fiscal Court allows an objection against the refusal to admit the appeal by the Fiscal Court.

The law provides for limited types of cases which are admissible for appeal in § 115 Sec 2 Fiscal Court Rules (FGO). Vice versa, this means that an appeal must be admitted in these cases (either by the Fiscal Court or by an objection against refusing the admission of the appeal by the Federal Fiscal Court).

This includes the following types of cases (Reasons for admission of an appeal):

• The nature of the case bears general significance; or
• The further development of case-law or the safeguarding of the consistent application of the law requires a decision by the Federal Fiscal Court; or
• a procedural deficiency is alleged, which is formally asserted and forms the rationale of the previous judgement.

Note: These prerequisites for the admission of an appeal must be substantiated by the legal representative in his appeal reasons. Complaints against the refusal to admit an appeal often fail, because the legal representative has only demonstrated that the judgement by the Fiscal Court is “merely factually” incorrect. This does not suffice.

An appeal to the Federal Fiscal Court may not be lodged and substantiated by the taxpayer himself but only by a legal representative (e.g. an attorney). The law stipulates mandatory legal representation. The purpose of mandatory legal representation becomes obvious to a laymen, when observing the special situations (pitfalls) to be navigated by an experienced legal representative during a litigation.

Once the appeal is admitted by the Fiscal Court, its judgement may be appealed against before the Federal Fiscal Court. Otherwise, a complaint about the refusal to admit must be lodged with the Federal Fiscal Court.

Two important deadlines must be observed:

• An appeal must be lodged within 1 month of the complete judgement being handed down (Attention: the appeal must be lodged with the Federal Fiscal Court and not the (regional or state) Fiscal Court);
• The appeal must be substantiated within two months of the judgement being handed down, if the Fiscal Court admitted the appeal, and within 1 month (after admission) if the Federal Fiscal Court admitted the appeal.

Upon receipt of a new case, a case number is assigned by the clerk of the Federal Fiscal Court.

Example: IV R 23/15 means that the case is heard by the IV. Senate of the Federal Fiscal Court, that it is an appeal (”R”) and that it is the 23rd appeal case dealt with by the IV. Senate in 2015. Senat des BFH anhängig ist (IV), dass es sich um eine Revision handelt („R“) und dass es das 23. Revisionsverfahren des IV. Senats im Jahr 2015 ist.

The parties (taxpayer and Tax Authority) will then receive a notice citing the case number. If the proceedings have been instigated by the taxpayer, he (rather than the Tax Authority) will receive a fee note for the court fees. This will - depending on the outcome - be credited or refunded later.

The clerk will further forward the statements of each party to the respective other party for comment.

Once no further comments are anticipated, the presiding Judge of the Senate will nominate one other member of the Senate to serve as rapporteur and a further member to serve as co-rapporteur. The assignment is based on the Senate’s internal schedule.

The rapporteur will then “solve the case” on the basis of case-law and literature. Subsequently, the co-rapporteur will offer his views in respect of the report. As soon as these statements have been formalised, the Senate will deliberate the case in its next session. This usually takes place without a prior oral hearing (only 3-5% of cases at the Federal Fiscal Court go into a hearing). The majority principle applies, which means that judges may be voted down by other judges.

The Federal Fiscal Court hands down its decision after completing the internal process mentioned above.

Decisions by the Federal Fiscal Court are generally by way of judgement. If the application (appeal or complaint) is not admittable, the court will decide by handing down a decree.

In most cases, a decision is made without a prior oral hearing, which means under exclusion of the public. Approx. 8 to 12% of appeal cases are decided without an oral hearing and frequently by written court decree. If all cases pending at the Federal Fiscal Court are considered (including complaint proceedings and other types of cases), the quota is only 3-5%.