Share Sale: German Federal Fiscal Court Sets Narrower Limits on the Deduction of Transaction Costs

The tax treatment of disposal costs associated with the sale of shares in corporations under Section 17 EStG is of considerable practical importance. This applies in particular to investments in limited liability companies (GmbHs) or substantial shareholdings held as private assets, which are frequently encountered in the German mid-market segment. 

Under Section 17 (2) sentence 1 EStG, the capital gain is determined as the difference between the sales proceeds and the acquisition costs, reduced by any disposal costs. Consequently, the classification of individual expenses as disposal costs directly affects the amount of taxable gain. 

The key distinction is whether the expenses are directly caused by the disposal itself or merely arise in connection with the tax treatment of the transaction. 

Decision of the German Federal Fiscal Court

In the case decided by the German Federal Fiscal Court (BFH) (judgment dated September 9, 2025, IX R 12/24), the taxpayers claimed deductions for tax advisory fees incurred in connection with determining the capital gain from the sale. 

The BFH denied the classification of these expenses as disposal costs within the meaning of Section 17 (2) sentence 1 EStG.

In its reasoning, the court emphasized that a direct causal connection to the disposal is required. Expenses arising solely from the obligation to prepare and submit tax declarations after the disposal do not meet this criterion. 

The BFH thereby follows its established case law, according to which the classification of expenses depends on the so-called “triggering event.” The decisive factor is what actually caused the expenditure to be incurred. 

Distinction Between Disposal Costs and Tax-Related Follow-Up Costs

The decision highlights the need for a functional distinction between different types of expenses. 

Only expenses directly attributable to the execution of the sale qualify as disposal costs. These typically include:

• Legal and financial advisory services related to the transaction
• Costs associated with negotiating and implementing the transaction agreements
• Transaction-related structuring services

The following expenses, by contrast, do not qualify as disposal costs:

• Costs for preparing tax returns
• Expenses incurred in calculating the taxable capital gain
• Subsequent tax documentation and compliance-related preparation costs

The decisive factor is not the economic proximity to the disposal but rather the functional allocation of the expense. 

Assessment of the Decision

The BFH’s ruling is particularly significant because it provides a final determination of a previously disputed issue.

Earlier, the Hessian Fiscal Court (judgment of February 22, 2024, case no. 10 K 1208/23) had allowed a broader deduction of tax advisory fees, placing greater emphasis on the economic connection with the transaction. The BFH rejected this approach and confirmed a restrictive interpretation of the term “disposal costs.” 

In doing so, the court continues the line of reasoning that also applies in other areas of income determination, particularly regarding the classification of disposal costs under Section 16 EStG. 

Implications for Private Shareholdings

For the taxation of share disposals held as private assets, the ruling confirms that not all advisory costs incurred in connection with the sale reduce the taxable gain. 

Instead, deductibility depends on whether the expenses are attributable to the execution of the disposal itself or to the subsequent tax treatment of the transaction. 

In particular, the following should be noted:

• The timing of the expense is not decisive.
• An economic connection with the disposal alone is insufficient.
• The decisive factor is the direct causal link to the disposal itself.

This distinction can have significant financial implications in individual cases. 

Key Takeaways from the BFH Judgment

With its ruling IX R 12/24, the German Federal Fiscal Court further clarifies the requirements for the deductibility of disposal costs under Section 17 EStG and confirms a narrow interpretation of the term. 

The decision makes clear that expenses incurred for the tax treatment of a share disposal do not qualify as disposal costs. What remains decisive is the direct connection between the expense and the disposal transaction itself. 

Consequently, a clear functional distinction is required when assessing the deductibility of advisory fees incurred in connection with share disposals.