The Cologne Fiscal Court has ruled that the proceeds from the sale of an internet domain are not subject to income tax if the sale takes place outside the one-year speculation period and the seller is not acting commercially. This was decided by the 8th Senate of the Cologne Fiscal Court in its ruling of 20 April 2010 (Ref.: 8 K 3038/08).
The plaintiff had registered an Internet domain with DENIC in 1999 and sold it in 2001 for DM 15,000. The tax office considered this to be another service taxable under § 22 number 3 EStG. This was because the plaintiff had waived his right to use the domain in return for payment of a fee. The 8th Senate did not agree with this in its ruling. Another service presupposed that the plaintiff had continuously relinquished the domain on the basis of his own right. According to DENIC's contractual conditions, however, the transfer of a domain requires the termination of the previous registration contract. The plaintiff had thus definitively lost his right to the domain.
The 8th Senate has allowed an appeal to the Federal Fiscal Court (Bundesfinanzhof, BFH), as the BFH has not yet decided whether the sale of a domain is taxable as another service.
Income is only subject to income tax if it falls under one of the 7 types of income under the Income Tax Act (section 2(1) EStG). Since the sale of an internet domain in the case of the judgement was not taxable as other performance according to § 22 number 3 EStG, the sale also took place outside the one-year speculation period according to § 23 paragraph 1 number 2 EStG and there was no reference to the other types of income, taxation had to be omitted.
Ruling of the Cologne Tax Court of 20 April 2010, ref. no.: 8 K 2030/08
Source: Press release of the FG Cologne
Goldberg Attorneys at Law
Attorney at Law Michael Ullrich, LL.M. (Information Law)
Specialist lawyer for information technology law (IT law)
E-mail: info@goldberg.de
