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The Federal Fiscal Court (BFH) has requested the Federal Ministry of Finance (BMF) to join the appeal proceedings in its decision of December 14, 2022 (X R 19/21) (https://www.bundesfinanzhof.de/de/entscheidung/entscheidungen-online/detail/STRE202310056/). The BMF is to explain the basis for the official guideline rates and how they were determined.

In cases of estimation under Section 162 of the German Fiscal Code (AO), the tax office is free to choose an estimation method. However, according to the BFH's jurisprudence, the estimation method must be suitable for achieving a reasonable and realistic result. Due to the principle of proportionality in Section 5 of the AO, the tax office must, when choosing from several possible estimation methods, select the one that most closely reflects reality. In the past, the BFH has generally accepted estimations based on an external business comparison using the BMF's official guideline rate collection.

However, in its decision of December 14, 2022, the Federal Fiscal Court (BFH) stated that it had not yet addressed the basis and parameters of the standard rates. Due to the considerable importance of the estimates for tax and tax criminal law purposes, the BFH involved the Federal Ministry of Finance (BMF) in the proceedings. This is intended to clarify, in particular:

• which individual data points, and with what weight, are included in the determination of the standard rates for the respective business category, how the representativeness of the data is ensured, and whether there are any individual data points that are excluded from the outset;

• whether the sometimes significantly varying levels of fixed operating costs (especially rent and personnel costs) across regions preclude the establishment of uniform national standard rates;

• why the results of external audits of so-called loss-making businesses are disregarded, even though such businesses generally also show a positive gross profit margin;

• whether fully or partially successful legal remedies pursued by taxpayers against tax assessments issued following an external audit are incorporated into the standard rate collection.

Furthermore, the Federal Fiscal Court (BFH) intends to clarify how the taxpayer can be enabled to verify the data on which the estimate is based.