Draft law proposes additional relief from change-in-ownership rules
Global Tax Update:September 2016/Germany
Germany’s Ministry of Finance (MOF) issued a first version of a draft law that would provide an additional opportunity for taxpayers to obtain relief from the general change-in-ownership rules by introducing a new net operating loss (NOL) carryforward category for “business continuation losses.” (Global Tax Update:September 2016/Germany)
Under the general change-in-ownership rules, a direct or an indirect transfer of 50% or more of the shares in a company to one new acquirer, related parties or parties acting in concert leads to the forfeiture of NOL carryforwards, interest carryforwards and current year losses of the relevant company. A direct or an indirect transfer of more than 25% of the shares leads to a pro rata forfeiture of the above tax attributes. All ownership transfers within a five-year period are counted together for purposes of the change-in-ownership rules.
There currently are two exceptions to the change-in-ownership rules: the intragroup restructuring exception and the built-in gains exception. Under the intragroup restructuring exception, a share transfer within one group with one common 100% shareholder does not constitute a harmful change in ownership, and under the built-in-gains exception, the above tax attributes continue to be available to the extent there is taxable built-in-gain available in the assets of the loss company.
The MOF now intends to provide an additional relief measure because the two existing exceptions are not sufficient in certain cases.
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