New and extremely important for corporations:
the current limitation of the loss deduction after a change of a shareholder – of more than 50% of the company shares – is now as well subject to review on grounds of possible unconstitutionality.
At the end of March this year, the German Federal Constitutional Court already ruled (step 1) that the regulation of the loss deduction after a change of shareholder(s)(1) - of more than 25% and up to 50% of the company shares - violates the Constitution.(2) Under the old regulation, the loss carryforward of a corporation ceased partially to apply if within 5 years there had been a transfer of 25% to 50% of company shares (harmful acquisition of shares). At the same time, the German Federal Constitutional Court ruled that the correction of this regulation should come into effect by the end of 2018. Simply put this means that shortened loss carryforwards made since January 2008 are now being reviewed by the tax office and will possibly be changed.
Now (step 2), the regulation concerning the loss deduction is being examined for cases where within 5 years there had been a transfer of more than 50% of the company shares. According to the present regulation, these losses are being dropped to 100% (practically lost). There is reason to believe that this rule will be a subject to correction as well.
Therefore, if in your German company (GmbH, UG, AG, etc.) the following has occurred:
(a) a change of shareholders, AND
(b) a transfer of more than 50% of shares, AND
(c) corporation tax and trade tax assessments which are not yet final (that is, the tax assessments are still a subject of a later review),
you should ask your accountant to verify IF
(a) the tax assessments still could be appealed,
(b) they contain notices of provisional status as to the loss deduction,
(c) it could be applied for the proceedings to be suspended.
(1) previously: § 8c Satz 1 KStG; now: § 8c Abs. 1 Satz 1 KStG
(2) 2 BvL 6/11; 29.03.2017
MBA for Finance and Financial Services (UK), Steuerfachwirt (GER)