The change in the shareholder structure of a limited property-owning partnership due to a contribution of the limited partners' shares in the partnership to a shelf-company may be exempt from real estate transfer tax pursuant to Section 6a sentence 1 RETT Act provided that the transferor, i. a., held at least 95% of the shares directly or indirectly or partly directly for an uninterrupted period of five years before the legal transaction took place. This was decided by the Supreme Tax Court in a most recent judgment.
In a most recent judgment, the Supreme Tax Court sees no taxable event within the meaning of Section 1 (2a) sentence 1 of the Real Estate Transfer Tax Act (regarding the taxation of a consolidation of shares) if a partnership holding an indirect interest in the real estate-owning partnership is interposed in the shareholder structure and where the shareholders themselves remain unchanged.
The Supreme Tax Court has granted a taxpayer’s appeal against a real estate transfer tax assessment on the grounds that an indirect change in the shareholdings in the members of a real estate partnership was less than a complete change of interest in the partnership. With its decision the court has confirmed its case law regarding share transactions made prior to the enactment of the Tax Amendment Act 2015.
A continuous and retroactive financial integration is also possible where a change in shareholder takes place during the year. The Lower Tax Court of Duesseldorf held that a fiscal unity or tax consolidation group for corporation income tax may be established already for the whole year in which the exchange of shares took place. In its judgement the court disagrees with the tax authorities’ official opinion on this issue. The Supreme Tax Court is now in charge and must finally decide the dispute.
The German Constitutional Court held that the rules for curtailment of loss relief on change of shareholders to be in breach of the formal provisions of the constitution under the principle of equal treatment insofar as changes of more than 25% and up to 50% of the shares in a company within a period of five years are concerned.
The Lower Tax Court of Muenster held that losses incurred during the year in which a harmful change in shareholding took place can be carried back to the previous tax year.
The ECJ has upheld a Commission ruling to the effect that the exemption from the provision for loss forfeiture on change of shareholders for troubled companies being rescued constitutes unlawful state aid.
The ECJ has held that a Finnish exemption from a loss forfeiture provision on the change of shareholders would be state aid if the authorities may apply it with discretion and would require Commission approval if the details of the scheme have substantially changed since Finland’s accession in 1995.
The advocate general on an ECJ case on special case exemption from a loss curtailment provision has suggested the court hold the exemption rule to be of pre-accession provenance and thus not to be disapplied as unauthorised state aid unless and until the Commission has come to that conclusion on the basis of a properly completed formal proceeding.
The Supreme Tax Court has allowed a manoeuvre effectively avoiding forfeiture of a loss carry-forward on change of shareholder through the sale of a worthless shareholder loan to a new shareholder followed by recovery from the injection of new capital.
