With the entry into force of the Act for the Modernisation of Partnership Law (“MoPeG”) on 1 January 2024, the legislators fundamentally reformed the rules regarding defective resolutions for commercial partnerships (OHG, KG, GmbH & Co. KG). Sections 109–115 of the German Commercial Code (HGB) contain for the first time detailed provisions on resolution procedures and the judicial enforcement of resolution defects.
In two judgments published in April 2025, the Supreme Tax Court decided that a corporation in which there is an atypical silent partnership can be a subsidiary within a corporation tax group. With its rulings, the court deviated from an earlier opinion of the tax authorities. The Federal Ministry of Finance has now commented on the consequences of the two judgments.
When determining whether a corporation with a direct interest in the partnership owning real estate is considered a new shareholder within the meaning of Section 1 (2a) sentence 4 of the Real Estate Transfer Tax Act because at least 90% of the shares are transferred to new shareholders, only the shareholding in the corporation must be taken into account. In a most current judgment, the Supreme Tax Court held that a previous participation of the new shareholder of the corporation in the partnership owning the real estate is irrelevant in this respect.
A shareholder loan granted to an asset-managing partnership is not recognized from a tax point of view insofar as the company's loan liability is attributable to its shareholder for tax purposes (Section 39 (2) no. 2 of the German Fiscal Code). According to a recent decision of the Supreme Tax Court, the loan agreement neither leads to deductible income-related expenses for the borrower nor to income from capital assets for the lender but is rather considered a tax-neutral contribution. This would be different only in the case of commercially active partnerships.
A shareholder loan granted to an asset-managing partnership is not recognized from a tax point of view insofar as the company's loan liability is attributable to its shareholder for tax purposes (Section 39 (2) no. 2 of the German Fiscal Code). According to a recent decision of the Supreme Tax Court, the loan agreement neither leads to deductible income-related expenses for the borrower nor to income from capital assets for the lender but is rather considered a tax-neutral contribution. This would be different only in the case of commercially active partnerships.
The profit from the sale of a share in the upper-tier partnership as prescribed in Section 7 sentence 2 no. 2 Trade Tax Act is not to be allocated to the hidden reserves of the upper-tier partnership and the hidden reserves of the lower-tier partnership. It is rather a single and uniform sales transaction at the level of the upper-tier partnership, the Supreme Tax Court said in a most recently published decision.
In a recently published judgment, the Supreme Tax Court held that the profit from the sale of the share in a project company in the legal form of a partnership (GmbH & Co. KG) is not included in the trading income of the plaintiff, a limited liability company (GmbH), because the conditions for trade tax liability - namely, the operation of a business as defined in Section 2 (1) Sentence 1 of the Trade Tax Act - were not (yet) met.
In a recently published decision, the Supreme Tax Court held that the profit from the sale of a limited partnership share which is proportionally encumbered with an atypical sub-participation is fully subject to trade tax.
In a most recently published decision, the Supreme Tax Court held that the first acquisition of a share in a partnership by a party who was not previously a partner under civil law is a taxable event for real estate transfer tax purposes pursuant to Section 1 (2a) of the Real Estate Transfer Tax Act (RETTA).
In the case of an atypical (non-typical) silent partnership interest in a limited partnership, the tax bases for the “partnership and atypical silent partner” and those for the limited partnership cannot be determined separately and uniformly in a single assessment notice, the Supreme Tax Court said in a most recently published decision.
In a recently published decision, the Supreme Tax Court had to determine whether, and under what conditions, the acquisition of a share in a partnership is subject to real estate transfer tax if the interest is held under a trust arrangement and the share is later transferred from the trustee to the trustor.
The Federal Constitutional Court held that § Section 6 (5) Income Tax Act providing for the transfer of business assets at book values to be incompatible with the German Basic Law insofar as it rules out a transfer at book value between partnerships with identical shareholding. This exclusion from the tax privilege is incompatible with the general guarantee of the right to equality and thus not justified.
The validity of an assessment notice on the separate and uniform determination of the tax bases (profit assessment notice) for 2013 which was issued after a partnership had been fully terminated was in dispute before the tax courts. In its most recent decision, the Supreme Tax Court disagreed with the view of the tax court of first instance who has held that a profit assessment notice issued to a fully terminated partnership is always null and void.
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.
An untypical silent partnership in the controlled group company does not generally prevent the recognition of a consolidated tax group for corporation tax purposes. With this current decision, the Supreme Tax Court disagrees with the previous opinion of the tax authorities.
The loss forfeiture rules of Section 8c of the Corporation Tax Act in the version valid for 2014 are not applicable to deductible losses which are allocated to a corporation as partner of a limited partnership pursuant to Section 15a Income Tax Act. With this decision, the Supreme Tax Court contradicts the view of the tax administration.
The fact that a commercial limited partnership (KG) receives income ranking as business income because of the so called „tainting effect“ does not preclude the partial write-off of a worthless loan owed to its partner if the principles of corresponding accounting between partnership and the partners no longer apply because of the discontinuation (cessation) of the business of the KG. Unlike the tax court of first instance, the Supreme Tax Court allowed the loss from the partial write-down to be recognized already at the time of the cessation of the business activities.
In a decision published in April 2025 the Supreme Tax Court held that the effective day on which the actual activities are carried out by a partnership is relevant to determine the begin of its trade tax liability.
The participation of a limited liability company (GmbH) as general partner in a limited (non-trading) real estate managing partnership (KG) does not entitle the GmbH to an extended deduction of the part of income from the administration and use of own real estate within the meaning of Sec. 9 No. 1 2nd Sentence Trade Tax Act if the GmbH does not have a share in the assets of the KG. The Supreme Tax Court held that the general partner GmbH uses and manages third-party property rather than managing own real estate as presupposed by the statutes.
In a recent decision the Supreme Tax Court held that losses from a genuine business activity of an asset-management civil-law partnership (GbR) can lead to the reclassification of the otherwise asset-managing (non-business) activity as trading income if the so-called de minimis limit is exceeded.
