Passive Decoupling Resulting from a DTA Amendment – Scope of Application and Time of Taxation According to the Federal Fiscal Court

In its ruling of November 19, 2025 (I R 41/22), the Federal Fiscal Court (BFH) held that the mere conclusion of a new double taxation agreement (DTA) is sufficient to trigger exit taxation under Section 4(1), sentence 3 of the Income Tax Act (EStG)—without any active involvement on the part of the taxpayer. At the same time, the BFH corrects the BMF letter dated October 26, 2018: The relevant date is not the start of the DTA’s applicability, but the very last legal second before that—i.e., the assessment period of the previous year.