Germany’s reinvestment relief faces an EU-law challenge

A timing benefit, not a blanket exemption

Section 6b of the Einkommensteuergesetz, Germany’s Income Tax Act, allows qualifying gains on specified fixed assets, including land and buildings, to reduce the cost of eligible replacement assets. Where no immediate deduction is made, subsection 3 permits a tax-reducing reserve, normally used within four years; qualifying new buildings can have six years. Reduced replacement-asset costs also affect subsequent depreciation.^[2]

Subsection 4, No. 2, requires the asset sold to have belonged continuously to a German permanent establishment’s fixed assets for at least six years. No. 3 separately addresses the replacement asset’s allocation. The other conditions include specified profit computation, a gain remaining within German taxable profit and traceable accounting entries.^[2]

The proposed infringement finding

In C-410/25, the challenged distinction concerns the original asset’s German-establishment allocation—not the six-year ownership period itself. The opinion considers businesses without a German permanent establishment comparable where Germany taxes their property-disposal gains. Ćapeta rejects the investment-promotion, tax-coherence and taxing-powers justifications advanced for immediate taxation instead of deferral.^[1]

The opinion preserves an important geographic limit: it treats Article 64(1) TFEU’s grandfather clause as protecting this restriction in third-country relations, but not relations with EEA states. Groups should not assume its proposed EU/EEA conclusion extends to every foreign investor.^[1]

Keep the instalment route separate

Current subsection 2a provides a separate application-based route for paying tax in five equal annual instalments where replacement investment is allocated to business assets in another EU or EEA state. Missing reinvestment evidence, or costs below the gain, can trigger interest. Section 52(14) contains historical application rules and extensions for specified reserve-expiry periods; the ordinary time limits are therefore not universal.^[2][3]

This is an Advocate-General opinion, not a Court judgment or enacted amendment. For multinational property investors, it identifies a disputed cash-flow disadvantage without establishing an automatic relief entitlement or a new commencement date.^[1]