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Current study on influence, team dynamics and decision-making processes in M&A transactions.

The tax-neutral transfer of special business assets ahead of a change of legal form is a popular structuring approach in advisory practice, but it carries risks. The Saxony-Anhalt Fiscal Court has recently ruled that a gap of just ten days and the absence of a legal link between the implementation steps can result in the retrospective taxation of hidden reserves. An appeal on points of law is pending before the Federal Fiscal Court (BFH), so the issue has not yet been finally resolved.

If a successor [unentgeltlicher Rechtsnachfolger] sells shares received within the seven-year lock-up period [Sperrfrist], a contribution gain [Einbringungsgewinn I] arises retroactively (section 22(1) sentence 1 of the Reorganisation Tax Act [Umwandlungssteuergesetz–UmwStG]). To whom this gain is to be attributed has been disputed, because section 22(6) of the Reorganisation Tax Act deems the successor to be the contributing party. The tenth chamber of the Federal Fiscal Court [Bundesfinanzhof–BFH] has now ruled that the gain is to be attributed to the original contributing party. A foundation [Stiftung] as heir is therefore not subject to corporation tax on the gain but is taxed on it, as universal successor [Gesamtrechtsnachfolgerin], at the deceased’s income tax rate. The Federal Fiscal Court applies a teleological reduction to the wording, which it considers unambiguous in this respect (Federal Fiscal Court judgement of 22 Sep 2026, file ref. X R 8/24).

On the basis of section 34c(5) of the Income Tax Act [Einkommensteuergesetz–EStG], the Circular on Foreign Activity [Auslandstätigkeitserlass–ATE] exempts from tax the employment income from certain activities abroad, including activities within the framework of German public development aid. The tax authorities were entitled to restrict this to projects financed directly from German budgetary funds. Projects of the European Development Fund [Europäischer Entwicklungsfonds–EDF] are not covered. After the Court of Justice of the European Union [Europäischer Gerichtshof–EuGH] declared the practice compatible with EU law, the Federal Fiscal Court [Bundesfinanzhof–BFH] has now also confirmed it: the courts examine only whether the interpretation of general administrative instructions is possible and not arbitrary (Federal Fiscal Court order of 2 Sep 2026, file ref. I R 51/23 (I R 20/18)).

Where a hidden profit distribution [verdeckte Gewinnausschüttung–vGA] is recognised at the level of a limited liability company [GmbH], a final tax assessment notice issued to the shareholder may also be amended under section 32a(1) of the Corporation Tax Act [Körperschaftsteuergesetz–KStG]. The Federal Fiscal Court [Bundesfinanzhof–BFH] interprets the provision broadly: it covers not only the capital income arising from the hidden profit distribution but also its indirect consequences – for instance a hidden contribution [verdeckte Einlage] to a sister company which, as subsequent acquisition costs, increases a liquidation loss under section 17(4) of the Income Tax Act [Einkommensteuergesetz–EStG]. In substantive terms, however, the Federal Fiscal Court draws clear limits: the hidden contribution is to be recognised only at the going-concern value [Teilwert] of the receivable (Federal Fiscal Court judgement of 8 Sep 2026, file ref. IX R 16/25).

Property companies may manage their own capital assets alongside their real property without jeopardising the extended trade tax reduction [erweiterte Kürzung] under section 9 no. 1 sentence 2 of the Trade Tax Act [Gewerbesteuergesetz–GewStG]. This may also include forming a limited liability company [GmbH] and holding its shares. If, however, the GmbH is formed for others, that is, with the aim of transferring the shares onwards shortly afterwards, there is no harvesting of fruits [Fruchtziehung] from the company’s own capital assets. This also applies where the shares are, as planned, transferred to the company’s own shareholders or to persons related to them. The Federal Fiscal Court [Bundesfinanzhof–BFH] does not require market participation recognisable to third parties (Federal Fiscal Court judgement of 18 Jun 2026, file ref. III R 29/23).

German inheritance tax is once again under constitutional scrutiny. On 12 and 13 October 2026, the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) held oral hearings in two proceedings concerning key issues of current inheritance tax law. According to the official schedule, the hearing in case 1 BvF 1/23 took place on 12 October 2026 and the hearing in case 1 BvR 804/22 on 13 October 2026.

In a letter dated 20 October 2026, the Federal Ministry of Finance (BMF) responded to the judgment of the Federal Fiscal Court (BFH) of 11 December 2025 (IV R 17/23, DStR 2026, 395): for part-consideration transfers of individual assets under section 6(5) sentence 3 of the Income Tax Act (EStG), a gain now arises in all open cases only to the extent that the consid-eration exceeds the book value. The tax authorities are abandoning the ‘strict separation theo-ry’ and revoking their 2013 non-application decree. This article explains what is changing, where the BMF letter goes beyond the judgment, why loss cases may turn into a trap and for whom an application to apply the previous legal position is worthwhile.

German Federal Fiscal Court clarifies financial integration requirements and reinforces the view that integration criteria must be assessed together in the context of the specific corporate structure, rather than in isolation

The Contribution Procedure Ordinance (BVV) takes effect on 1 January 2027. Answer a few questions now to receive an assessment.

In its judgment of 27 May 2026 (case reference 6 K 2020/22), the Cologne Fiscal Court (Finanzgericht, FG) ruled that non-resident applicants may, subject to certain conditions, have a direct entitlement under EU law to interest on delayed refunds of Germanwithholding tax. Although the case concerned an Austrian private foundation, the ruling is likely to have implications well beyond the individual case for international funds, asset managers, banks and holding companies. Leave to appeal on points of law was granted.

Since 2025, tax audit findings can have implications well beyond the tax originally audited. Section 153(4) of the German Fiscal Code (AO) requires taxpayers to apply audit findings implemented in assessments that have become final and binding to other tax returns, even where these relate to different taxes or periods not previously audited. The interaction between VAT and Insurance Premium Tax (IPT) is particularly sensitive. Under section 4 no. 10 of the German VAT Act (UStG), a single set of facts can affect both tax regimes. This article explains the new compliance obligations, highlights areas of uncertainty in interpreting the rules and outlines how businesses can manage the associated risks systematically.

In its judgment of 20 May 2026 (case reference IV R 37/23; parallel judgment IV R 4/26), the German Federal Fiscal Court (BFH) held that a market support payment paid to a foreign related party may be business-related and consistent with the arm’s length principle where the payment serves to safeguard or increase the payer’s own royalty income. The ruling provides additional arguments in support of existing distribution and limited-risk distributor (LRD) structures.

Where a limited liability company [GmbH] pays a person close to its shareholder an excessive purchase price for a property, real estate transfer tax is assessed on the full purchase price (section 8(1) of the Real Estate Transfer Tax Act [Grunderwerbsteuergesetz–GrEStG]) – even if the excess price, as a hidden profit distribution [verdeckte Gewinnausschüttung–vGA], simultaneously triggers gift tax. An amendment of the real estate transfer tax assessment on account of conflicting tax assessments under section 174(1) sentence 1 of the Fiscal Code [Abgabenordnung–AO] is ruled out, because the relationship of mutual exclusivity between the two taxes covers only gifts of real property within the meaning of section 3 no. 2 sentence 1 of the Real Estate Transfer Tax Act. The decision confirms that section 174 of the Fiscal Code is not a general instrument for overriding the finality of assessments (Federal Fiscal Court [Bundesfinanzhof–BFH] judgement of 29 Jul 2026, file ref. II R 11/24).

Federal Fiscal Court V R 36/24: VAT group despite two-thirds clause with capital majority and sole managing director. Corporation and trade tax: stricter test.

In a demerger [Aufspaltung], the acquiring company need not restart the five-year pre-retention period of the real estate transfer tax group clause. The Federal Fiscal Court [Bundesfinanzhof–BFH] attributes to it, as partial universal successor, the prior holding period of the demerged company, provided the shareholding in the dependent company was included in the division and acquisition agreement. The periods under section 6a of the Real Estate Transfer Tax Act [Grunderwerbsteuergesetz–GrEStG] are not strictly personal but tied to the shareholding. However, the result does not readily extend to spin-offs [Abspaltung], and hive-downs [Ausgliederung], (Federal Fiscal Court judgement of 29 Jul 2026, file ref. II R 5/23).