Germany: Exemption to Germany’s change-in-ownership rules expanded
The German tax reform 2015, published in the federal gazette on November 5 2015, includes a new exemption from the strict change-in-ownership rules that result in the forfeiture of tax loss carryforwards.
According to the change-in-ownership rules introduced in the 2008 business tax reform, a direct or indirect transfer of more than 25% of the shares of an entity to an acquirer will result in a pro rata forfeiture of tax loss carryforwards; a transfer of more than 50% of the shares will result in a complete forfeiture of tax loss carryforwards.
For transfers after December 31 2009, an exemption for intra-group reorganisations applied in cases where the 'same person' held directly or indirectly a 100% participation in both the transferring and the purchasing entity. However, the exemption did not apply to a share transfer from or to the ultimate parent entity and where the ultimate parent entity was not held by the 'same person', which would be the case, for example, for any stock exchange-listed company.
The tax reform 2015 extends the intra-group exemption rule to apply to changes of shareholders within a 100% controlled group, including the situation where an ultimate parent is the transferring or the purchasing entity and is held by more than one person. Additionally, the ultimate shareholder can be a partnership or an individual; this had been an area of uncertainty and the Federal Ministry of Finance had issued a draft decree that would not allow a partnership or individual to be the ultimate shareholder.
The new rules apply retroactively to share transfers taking place after December 31 2009, thus allowing taxpayers to benefit in cases where tax losses were already forfeited under the previous wording of the law.
Alexander Linn (email@example.com) and Thorsten Braun (firstname.lastname@example.org)
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