After all the drama about the tax exemption for so-called “turnaround profits” (“Sanierungsgewinne“, (see more details here), the legislator – after a positive statement of the EU Commission last summer (cf. here) – is currently implementing the “reorganisation decree in legal form” (“Sanierungserlass in Gesetzesform“) within the framework of the so-called “Annual Tax Act 2018” (now referred to as “Act for the Avoidance of Turnover Tax Losses on Trade in Goods on the Internet and for the Amendment of Further Tax Regulations”) in a rather unspectacular manner. After approval by the Second Chamber of the German legislative Body (“Bundesrat“) on 23 November 2013, the corresponding § 3a EStG (German Income Tax Act) is expected to enter into force before the end of the year.
The new legal regulation had become necessary because the approval by the EU Commission provided for in the original enactment of § 3a EStG was different from that then granted by the Commission for (see more details here). Accordingly, the legislator has now lifted the originally planned “EU reservation” for the entry into force of the tax exemption for restructuring gains.
In contrast to the previous restructuring decree, the new regulation also covers trade tax payments (cf. § 3a GewStG new, “Gewerbesteuer“). On the other hand, the restructuring profits of individual enterprises are expressly not covered by the new regulations, since individual entrepreneurs shall not be enabled to “enter their private lives without debt or to build up another basis of existence” (cf. BT-Drs. 18/11531, p. 12). The responsible working group of the German Bar Association (DAV) rightly criticised this unjustified discrimination against sole proprietors (cf. here). It remains to be seen whether the government will “follow up” on this topic in a later crisis.
The tax exemption of reorganisation profits applies retroactively even to those cases in which taxes on a reorganisation profit were waived in whole or in part before 8 February 2017 (cf. § 52 para. 4a EStG new, see also BR-Drs. 559/18, p. 4, cf. here). Thus the longer “discussion” between the Federal Fiscal Court (BFH) and the Ministry of Finance (BMF) on the treatment of old cases (see most recently here) should finally find its well-deserved conclusion.
“Act against the Avoidance of Turnover Tax Losses on Trade in Goods on the Internet and for the Amendment of Further Tax Regulations” as of (BT-Drs. 19/5595; in German)