Tax & Legal

The ECJ overturned an earlier judgment of the European General Court and held that the German tax legislation concerning the possibility of a loss-carry forward to future tax years despite a harmful share acquisition in cases of a rescue plan to save the company from insolvency – known as the salvage clause - is not illegitimate state aid.

On 30 November 2017, the Federal Ministry of Finance published the final version of its circular on the application of the loss forfeiture rules according to Section 8c of the Corporation Tax Act (CTA), including comments on the Hidden Reserve Clause and the Group Clause. This circular replaces the circular on this subject from 4 July 2008.

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.