Costs of Civil Proceedings Deductible as Extraordinary Burden

The Federal Fiscal Court changed its ruling case law concerning the deductibility of costs from cases in civil courts to the advantage of us taxpayers. Such is the bottom line of its judgment of May 12, 2011 (re VI R 42/10).


Up to now, deducting costs of civil proceedings has only been possible, when the costs were of existential relevance. The judges of this court have now abandoned this concept.

How did this happen? A lady sued her insurance to pay her sick day allowance. Her allowance was cancelled as she became sick. Though this matter was not a matter of life or death for her, the judges granted the deduction for the legal costs because there was a sufficient chance for her to win the case.


At first glance, this might sound very promising but it is not - for two reasons. When deducting extraordinary expenses, the tax office first takes out a reasonable burden which you are expected to cover yourself and after that burden of approx. 5% these costs will reduce your taxation.

Besides, you will have to have your lawyer certify in a separate letter that there is a sufficient chance of winning the case. Whether it suffices that this certificate is a "one liner" or if only an expert opinion will suffice has been left open by the judges. They also left unanswered from which perspective is this assumption to be made? At which time during the proceedings does the chance of winning have to been predicted?

Seen more closely, this blessing is more a curse.

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