Tax & Legal

In case of merger of a corporation into a partnership during the year the Supreme Tax Court decided that the acquiring legal entity as the ("new") controlling company also fulfills the requirement of financial integration as a prerequisite for a tax group („Organschaft“) of the former controlling company even if the conversion is not made with retroactive effect from the beginning of the financial year.

The European Court of Justice decided that Article 8(2) of Council Directive 2009/133/EC precludes a national legislation which makes the benefit of that provision subject to conditions relating to a reduction in the shareholding of the shareholder of the transferring company in that company or to a reduction in the share capital of that company, which are not provided for by that directive.

If a new church parish is established by merging several church parishes, real estate transfer tax is payable if the original parishes held shares in real estate-owning GmbHs and these GmbH shares are all in the hands of the newly established church parish after the merger. The Supreme Tax Court decided that this also applies if those GmbHs operate charitable institutions such as hospitals or retirement homes.

The tax exemption from real estate transfer tax (RETT) in the event of restructuring within a group under Section 6a of the RETT Act also applies to cases where a dependent second-tier company is merged with a subsidiary of a group parent company, even if in the five years after the transaction 25 percent of the shares in the parent company are transferred to a new shareholder. In his decision the Supreme Tax Court held that the subsidiary must be regarded as “controlling company” within the meaning of the RETT Act.

The tax exemption from real estate transfer tax (RETT) in the event of restructuring within a group under Section 6a of the Real Estate Transfer Tax Act (RETTA) does not constitute State Aid prohibited by EU law.

The Supreme Tax Court has held that the exclusion of merger cost as part of the non-taxable profits and losses on merger also applies to indirect shareholdings.

The Supreme Tax Court has held that the sale of a partnership share is subject to trade tax if the tax effective dates of sale and of its acquisition of the business of its GmbH subsidiary through merger are identical.

The Supreme Tax Court has upheld a Customs decision to refuse to allow transfer of a merged company’s right to manufacturing relief from its electric power duty to the surviving entity.