Germany: German rules for restructuring relief

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Germany: German rules for restructuring relief

Linn
Braun

Alexander Linn

Thorsten Braun

The German Federal Tax Court has ruled that the existing administrative practice on the exemption of certain tax technical gains, triggered in restructurings of companies facing difficulties, lacks a legal basis and cannot be applied any longer (case: GrS 1/15). Shortly after the judgment, however, the German legislator introduced draft provisions that would reinstate the past administrative practice.

Under administrative guidance issued on March 27 2003 on restructuring relief (Sanierungserlass), certain tax technical gains triggered by debt waivers and other debt restructurings as part of an overall concept to prevent insolvency of a company in difficulty and to restore its competitiveness (covered gains) were subject to a special tax treatment. The covered gains could be offset in full against existing tax loss carry forwards without application of minimum taxation rules and any tax on exceeding covered gains could be deferred and potentially waived. In proceedings initiated by a taxpayer, which realised similar gains but where tax authorities denied the application of the restructuring relief, the German Federal Fiscal Court ruled that there is no need to analyse whether the requirements set forth in the administrative guidance were met, as this guidance is void because it lacks a legal basis.

In a reaction to this judgment, the German Upper House of Parliament has proposed introducing provisions in the German Income Tax Act and Trade Tax Act, which would effectively reinstate the past practice. Under the proposed rules, a company can elect to exempt gains from debt restructuring measures, which are part of a restructuring of a company in difficulty and have the purpose to restore competitiveness of such a company. If a company applies for such a tax exemption, the company would lose all tax carry forwards and current year losses. It is proposed that the rules will apply to all open cases. If enacted, there would not be a period where no restructuring relief was available to companies undergoing a qualified debt restructuring.

As a reaction to discussions in literature over whether the administrative practice (if applicable) is in line with EU state aid rules, the legislative proposal would include a provision that defers the enactment of the new rules until the European Commission approves the measure. By notifying the Commission of the measure, an approval (no-aid decision or positive decision under Article 4, paragraph 2 or 3 of Council Regulation (EU) 2015/1589), will provide certainty for any company making use of the new rules. This intention to notify the measure shows the increased importance of state aid rules in the area of taxation, but also shows the increased awareness of legislators of these rules, which is a welcome step towards more certainty.

Alexander Linn (allinn@deloitte.de) and Thorsten Braun (tbraun@deloitte.de)

Deloitte

Tel: +49 89 29036 8558 and +49 69 75695 6444

Website: www.deloitte.de

more across site & shared bottom lb ros

More from across our site

In looking at the impact of taxation, money won't always be all there is to it
Australia’s Tax Practitioners Board is set to kick off 2026 with a new secretary to head the administrative side of its regulatory activities.
Ireland’s Department of Finance reported increased income tax, VAT and corporation tax receipts from 2024; in other news, it’s understood that HSBC has agreed to pay the French treasury to settle a tax investigation
The Australian Taxation Office believes the Swedish furniture company has used TP to evade paying tax it owes
Supermarket chain Morrisons is facing a £17 million ($23 million) tax bill; in other news, Donald Trump has cut proposed tariffs
The controversial deal will allow US-parented groups to be carved out from key aspects of pillar two
Awards
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2027 World Tax rankings and the 2026 ITR Tax Awards globally
Pillar two was ‘weakened’ when it altered from a multinational convention agreement to simply national domestic law, Federico Bertocchi also argued
Imposing the tax on virtual assets is a measure that appears to have no legal, economic or statistical basis, one expert told ITR
The EU has seemingly capitulated to the US’s ‘side-by-side’ demands. This may be a win for the US, but the uncertainty has only just begun for pillar two
Gift this article