In a ruling issued at the end of January 2017, the German Federal Supreme Court (“Bundesgerichshof“, “BGH“) has tightened the requirements for the liability of tax advisors in a corporate crisis.
Only one month after the surprising decision of the German Federal Tax Court (“Bundesfinanzhof” (BFH)) on the so-called “Decree on Turnaround” (“Sanierungserlass”), the German Bundesrat had already proposed a new statutory regulation and also the German higher fiscal authorities (OFD Frankfurt) has issued a directive on how to deal with applications for the waiver on the taxation of “turnaround profits”. And now the German Federal Government (represented by the Federal Ministry of Finance, BMF) and the German Parliament seemingly want to set the pace:
While the Grand Coalition has so far only dealt stepmotherly with the third stage of the insolvency law reform during the now expiring legislative period, it’s actions seems seem to get pace at the very last minute as the recent introduction of a “group insolvency law ” into the German Insolvency Act illustrates.
Contrary to my belief, the German legislator seems to have understood the gravity of the situation with which the recent decision of the German Federal Tax Court (“Bundesfinanzhof” (BFH)) has left the turnaround community in dealing with companies in crisis. The German Bundesrat as well as the fiscal authorities reacted rather quickly, unlikely as it may have seemed.
After all these questionmarks, doubts and armageddon-foresights (cf. for February here) now that: Hope! First, we all survived the 15th of March 2017 – despite the doomsday-sayers, neither the debt-ceiling nor the rate-hike in the US nor the Dutch elections could derail the “economic train” which seems to get momentum even beyond Germany now. But, as always, I am getting ahead of myself. So, let’s see what’s behind the (German) curtain for this month:
In the end, the reform went through unexpectedly fast: After a first reading in the German parliament in January 2015 the intended reform of the German insolvency avoidance law has been put on the back burner due to discussions on possible fiscal privileges. Now, the Bundestag has adopted the reform rather suddenly on 16 February 2017 – without further discussion and without fiscal privileges.
Germany’s economy seems to get stronger by the month – falling unemployment, rising GDP, governmental surplus, you name it. So, is really everything glossy and any other view merely a doomsday-sayer’s paranoia? Let’s check:
In a resolution, published on 7th February 2017 (though already passed on 28th November 2016), the German Federal Tax Court (“Bundesfinanzhof” (BFH)), decided that the so-called “Decree on Turnaround” (“Sanierungserlass”) issued by the Federal Ministry of Finance (“Bundesministerium der Finanzen” (BMF) contravenes principles of the lawfulness of the administration and is therefore nil and void. Now, so-called “turnaround-profits” might be taxed, a fact which seriously endangers future turnarounds.