Again, it is not really easy to discern a clear picture of the German economy’s status in August. Probably due to the holiday season (which extended until late August), the statistics might, as in July (cf. here), prove to be somewhat misleading:
According to yet unconfirmed press releases, the EU Commission has no objection to the new legislation of the so-called “Sanierungserlass“, now contained in § 3a German Income Tax Code (“Einkommenssteuergesetz” “EStG“), which was declared unconstitutional by the German Federal Tax Court (“Bundesfinanzhof“, “BFH“) last year (see here). Since the ECJ recently also surprisingly declared the so-called “Sanierungsklausel” of § 8c 1a KStG as being legitimate (see here), taxation in business turnarounds will most likely be more relaxed – just in time for the beginning of the next economic crisis (see here).
In the legal realm, this summer’s silly season is filled with a heavily discussed decision of the German Constitutional Court (“Bundesverfassungsgericht“, “BVerfG“) regarding the protection of internal corporate documents from seizure by the public prosecutor. In the case underlying the decisions, the Munich public prosecutor had seized various documents relating to Audi’s involvement in the “Diesel-scandal” held in the German offices of the US-based law firm Jones Day.
Bombshell from Brussels: The European Court of Justice (ECJ) recently upheld the so-called “restructuring clause” (“Sanierungsklausel“) of § 8c para 1a German Corporate Tax Code (“Körperschaftssteuergesetz“, “KStG“) and overruled the previous judgement of the European Court of First Instance from 2016 and the respective decision of the European Commission which both had declared the Sanierungsklausel as nil and void. As a consequence, shares of a company may now be transferred to potential investors as part of a corporate turnaround using the accumulated loss carry-forward of the company.
After the last attempt by the German Federal Ministry of Finance (“Bundesministerium der Finanzen” (“BMF”)) to limit the effects of a ruling on the so-called “Decree on Turnaround” (“Sanierungserlass”) by the German Federal Tax Court (“Bundesfinanzhof” (BFH)) (here) in relation to old cases had failed brilliantly (here), the Ministry started another attempt to upheld the decree at least for old cases under the principle of the protection of legitimate expectations with a decree as of of 29 March 2018. To no avail.
What do the current cases of Theranos, Valeant or Quindell have in common? They are all examples of potential “fraud”. Although the number of such cases is rising in Germany – e.g. Volkswagen, S&K or P&R, to name but a few – this area of law is still rather under-lit in the German Mittelstand (in contrast to the anglo-american legal system), as the following anecdote may illustrate:
As part of a compliance event, one of the speakers asked the auditory if the so-called “Fraud Triangle” was known. From the perhaps one hundred participants only three or four reluctantly raised their hands. If this basic knowledge is lacking even within an expert audience, my very own conclusion was, how should a medium-sized business manager even recognize fraud in his own company or committed by one of his customers or suppliers? Reason enough to present some basics of this area.