Update on the tax deductibility of cartel fines

Key Takeaways

1. In German case law, the tax deductibility of cartel fines is subject to strict conditions and has to date been rejected. This is exemplified by three decisions of the Federal Fiscal Court (Bundesfinanzhof, “BFH”) from 2013, 2019 and 2022.
2. In a recent ruling, the FG Münster – further tightening BFH case law – regards the German Federal Cartel Office’s explicit intention to impose a purely punitive fine as a “primary, strong indication” for tax treatment as well.
3. In the appeal proceedings, the BFH has the opportunity to subject this line of case law to a fresh review. It remains interesting to observe whether the BFH will change its stance. Should it decide to do so, it could indeed become possible for companies to claim cartel fines as a tax-deductible expense.

Regulatory cartel proceedings and their consequences

National competition authorities, such as the German Federal Cartel Office, and the European Commission, which is responsible for cross-border infringements, pursue breaches of cartel laws with vigour, resorting to far-reaching investigative measures and sanctions.

If suspicions of anti-competitive behaviour against a company (e.g. price-fixing among competitors) are substantiated, the regulatory proceedings will ultimately result in the imposition of a substantial fine. This can amount to up to ten per cent of the group’s global turnover per infringement and is largely based on the turnover related to the offence, the duration of the infringement and the circumstances of the specific case.

Beyond the imposition of a fine, there are further negative consequences for the company, namely reputational damage, a possible ban on tendering, and in particular the risk of cartel damage claims from potentially aggrieved customers.

To reduce the amount of the fine and for strategic reasons, many cartel proceedings are settled with the authority.

Tax deductibility of cartel fines – starting point and judicial practice

In view of this array of negative consequences, attempts have repeatedly been made in the past to seek ‘relief’ based on tax law provisions. The objective is to consider the payment of the cartel fine as a business-related expense (business expenditure, cf. Section 4(4) of the German Income Tax Act (EStG)) in order to reduce profits and lower the tax burden.

The starting point here is the general prohibition on the deduction of business expenses under Section 4(5), first sentence, No. 8, first sentence of the Income Tax Act (EStG). However, an exception applies under the fourth sentence of this provision: insofar as the fine disgorges the economic benefit gained through the breach of the law, a deduction as a business expense may be permissible.

Various Fiscal Courts and the BFH have so far relied primarily on objective criteria and examined whether the fine imposed is purely punitive (sanctioning) in nature or whether it also has elements of disgorgement. Of particular significance have been the decisions of the BFH of 7 November 2013 (Ref. IV R 4/12), 22 May 2019 (Ref. XI R 40/17) and 7 December 2022 (Ref. I R 15/19).

In the opinion of the BFH, fines imposed by the European Commission do not contain a disgorgement element and are therefore generally not deductible if the Commission limits its assessment of the fine to the so-called basic amount and subsequently considers only aggravating and mitigating circumstances. The fine may only contain a disgorgement component in individual cases where the basic amount has been increased, for example, in the context of taking aggravating circumstances into account based on unlawfully obtained profits. However, the Commission only addresses the latter in the rarest of cases.

Also, if fines are imposed by the Federal Cartel Office, the Federal Fiscal Court (BFH) focuses on whether, as evidenced by the fine decision, the disgorgement of the incriminated revenue has objectively taken place. The phrase widely used in the Federal Cartel Office’s fine decisions stating that the fine is of a purely punitive nature, does not prevent a detailed examination of the authority’s decision. According to the BFH, there is no objective disgorgement effect if no correspondence in terms of amount can be established between the level of the fine on the one hand and the economic advantage on the other, or if it is otherwise apparent that the assessment was clearly made without considering a specific economic advantage gained. In the cases decided by the BFH, this was denied in each instance, and reference was made to the fundamentally punitive nature of cartel fines.

In the European and national cases decided, the BFH thus consistently rejected the tax deductibility of corporate cartel fines.

Recent ruling by the FG Münster

The ruling of the FG Münster, handed down on 12 December 2025 and published in mid-March 2026, provides an opportunity to revisit the (non-)deductibility of cartel fines.

The facts of the case are as follows: as part of cartel proceedings before the Federal Cartel Office, the company concerned opted for a settlement. Following the (summary) fining decision by the competition authority, the fined company sought to treat the fine paid as a profit-reducing operating expense. This was rejected by the tax office.

In the court proceedings, the company had argued that the fine imposed had an overall objective disgorgement effect, as the impact of the sanctioned price-fixing agreements on the relevant market had been relevant to the assessment of the fine. This had been discussed during the settlement negotiations with the Federal Cartel Office. To support its legal position, the company submitted a private expert opinion on competition law, which dealt in particular with the basis for calculating fines in accordance with the authority’s Guidelines on the Calculation of Fines and the consideration of a ‘potential for profit and loss’ enshrined therein. However, the Federal Cartel Office had expressly stated that it did not intend to disgorge any profits.

The FG Münster did indeed dismiss the company’s claim and essentially followed the line of case law established by the fiscal courts over the last 15 years. Going further than the BFH’s approach, the FG Münster regarded the Federal Cartel Office’s stated intention to impose a purely punitive fine as a strong indication of the tax classification and non-deductibility. Furthermore, the court did not recognise any objective disgorgement effect – neither from the fine provisions themselves nor from the specific assessment of the fine. Neither the settlement proposal nor the Federal Cartel Office’s fine notice had a disgorgement effect. The court justified this on the grounds that, under the provisions of competition law (Section 81(4) and (5) of the German Act against Restraints of Competition (GWB) in the version of the 2005 GWB Amendment), the competition authority decides, within the scope of its discretion, whether a fine serves solely as a penalty or is also intended to disgorge an economic advantage. According to clear legislative intent, this decision lies within the discretion of the competition authority. It alone therefore determines the nature of the fine.

The FG also rejects the argument that every fine necessarily has a disgorgement effect in cartel law due to the accompanying preventive effect inherent in criminal and administrative fining law. In that context, fines of an exclusively punitive nature are specifically provided for by law (Section 81d(3) sentence 2 GWB).

The FG Münster has granted leave to appeal to the BFH due to the fundamental importance of the case. With reference to the partly novel lines of argument put forward by the applicant company regarding the authorities’ own guidelines on fines, the BFH should be given the opportunity to review its case law.

Outlook

The FG ruling suggests that the threshold for assuming a disgorgement component is even higher than in previous BFH decisions. From a business perspective, the ruling should therefore be regarded as ‘unfriendly to taxpayers’. Without an explicit calculation of additional revenue or benefit by the Federal Cartel Office, a disgorgement component is unlikely to be enforceable under this ruling. However, in terms of a conflict of objectives, the absence of such a calculation may well be advantageous for companies concerned in view of potential claims for damages.

The appeal is pending before the BFH under ref. no. IV R 2/26. The competent panel is the same Senate that already issued a landmark decision in 2013 on the (non-)deductibility of cartel fines. As the BFH is now dealing with the matter again, affected companies should consider whether to lodge an objection against relevant tax assessment notices and apply for the proceedings to be stayed until the appeal is concluded.

This article provides a non-binding overview of the subject matter and does not constitute legal advice. For further information or a personal consultation, please do not hesitate to contact the persons listed below.