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Update: Extension of the Period of the Retrospective period for Restructuring Measures in the German Reorganization Tax Act (UmwStG)

We have reported that the law for the Mitigation of the consequences of the COVID-19 pandemic in Civil, Insolvency and Criminal Proceedings Law of 27 March 2020 ("COVID-19 Law") extended the commercial law retroactive effect of restructuring (Link). Now the German Federal Ministry of Finance ("BMF") has taken a number of welcome initial steps to restore the balance between transformation law and reorganisation tax law.

Government draft adopted

Following the meeting of the Federal Cabinet on 6 May 2020, the BMF published the government draft of a law on the implementation of tax aid measures to overcome the corona crisis ("Corona Tax Aid Act"). This corresponds in essence to the BMF's drafting aid as of 30 April 2020 and also contains provisions on the retroactive effect of reorganisation tax law. The government draft is to be submitted to the German Parliament as the next step and will be discussed there without delay.

Regulations on the period of the retroactive effect under the German Reorganisation Tax Act (UmwStG)

The periods of retroactive effect for tax purposes shall be temporarily extended in order to achieve a parallelism with the extension of the retroactive period in section 17 (2) sentence 4 UmwG by the COVID-19 Act. In this Act, the retroactive effect under commercial law was initially extended from eight to twelve months for reorganisation processes in 2020. The period of application can also be extended beyond 2020 by statutory regulation.

By virtue of the reference in section 2 UmwStG, it had to be assumed that mergers pursuant to sections 3 et seq. UmwStG as well as split-ups and spin-offs according to sections 15, 16 UmwStG can also be carried out for tax purposes with a retroactive effect of twelve months. This view was confirmed in the explanatory statement to the government draft.

Transactions within the meaning of sections 20, 24 UmwStG (in particular contributions) and sections 9, 25 UmwStG ("crossing change of legal form") were not directly covered by the wording, as separate retroactive periods are regulated for each of these. The legislator has now acknowledged this problem. In the government draft, it addresses the periods of retroactive effect for tax purposes in accordance with section 9 sentence 3 UmwStG and in accordance with section 20 (6) sentences 1 and 3 UmwStG in the new section 27 (15) UmwStG-E and temporarily extends them to twelve months.

After the adoption of the law, the UmwStG uniformly provides for retroactive periods of twelve months if the application for registration or the conclusion of the contribution agreement is made in 2020. The Federal Ministry of Finance may extend the period of application by statutory order in accordance with the statutory order under the COVID-19 Act.

We will be pleased to advise you on the planning and implementation of a legal transformation as well as the coordination with the fiscal authorities.

Dr. Karl-Dieter Müller

Benjamin Knorr

Dragan Skrebic

Contact us

Dr Karl-Dieter Müller T   +49 30 26471-262 E   Karl-Dieter.Mueller@advant-beiten.com
Benjamin Knorr T   +49 30 26471-262 E   Benjamin.Knorr@advant-beiten.com
Dragan Skrebic T   +49 30 26471-262 E   Dragan.Skrebic@advant-beiten.com