Phase-aligned recognition of a minority shareholder’s compensation claim from a tax group
In its judgement on 16 July 2025 (file no. I R 1/23) the Federal Fiscal Court (so-called Bundesfinanzhof – BFH) handed down a decision with practical relevance on the utilisation of losses when a change of control occurs during the year. Particularly important is that a loss carry-back under section 10d of the Income Tax Act (so-called Einkommensteuergesetz - EStG) remains possible if an acquisition that is detrimental under section 8c of the Corporation Tax Act (KStG) has been made. The judgement creates new room to manoeuvre for restructuring and transferring participating interests.
If the penultimate partner of a limited partnership (KG) leaves the partnership, the partnership assets are transferred to the last partner. As a result of such an "accretion", the question arises as to whether and to what extent the tax losses of the former KG can be used by the last remaining partner. Recently, the Federal Fiscal Court (BFH) (ruling of 19 March 2025, XI R 2/23) had to decide on the use of offsettable losses in accordance with Section 15a EStG and trade losses in accordance with Section 10a GewStG by the remaining limited partner - and ruled in favor of the taxpayer.
We present you the recent case law of the Federal Fiscal Court and a regional Fiscal Court on the tax implications of pension obligations.
Gains on disposal when selling an interest in a partnership are not usually subject to trade tax. According to the Federal Fiscal Court judgment of 21/11/2024 (file ref. IV R 26/22), this principle does not apply in certain circumstances, however, resulting in the gains on disposal being subject to trade tax. In these cases, the trade tax is not charged to the seller but to the partnership. This can result in undesirable burdens on partners who are not involved in the sale.
The break-up of the “traffic light” coalition and the Bundestag elections that were brought forward to 23 February 2025 are having a considerable impact on tax reforms and plans for legislation. The lack of a majority makes concluding key legislative plans more difficult.
The Federal Fiscal Court (Bundesfinanzhof) had already blocked applying expanded trade tax reductions to lettings between two controlled companies belonging to the same consolidated tax group in the past. According to the Federal Fiscal Court’s latest judgment, of 11/07/2024 (III R 41/22), this is also to apply if the renting controlled company sublets the properties to third parties. This may result in additional tax burdens in the consolidated tax group in the subletting model.
Last year the Federal Fiscal Court (Bundesfinanzhof – BFH) decided that paying a pension and salary to an owner-director at the same time does not mean that in principle the pension is to be classified as a hidden profit distribution. The tax authorities only partially adopted the principles of the judgment in the latest amendment of its Federal Ministry of Finance (BMF) circular. Cases where directors work part-time are critical.
Loans from shareholders and intragroup loan relationships (intercompany loans) are a popular means of structuring how liquidity is provided and distributed within a group of companies. If the debtor gets into difficulties, the creditor is usually affected not only by the loss of value or the bad debt but – if the loans are between corporations and the shareholding is at least 25 per cent – by the ban on tax deduction under Section 8b para. 3 sentence 4 f. of the Corporation Tax Act [KStG] as well.
Including an increase in funding volumes and faster payout. We’ve put the most important details together below.
