There is, however, an additional restriction on loss deduction
for corporations. Changes in the ownership of corporations can
cause forfeiture of losses for tax purposes under the so-called
change-of-control rules. The restriction proceeds in two steps.
Acquisitions of more than 25% and up to 50% of a corporation’s
shares or voting rights within a fve-year period by a person or
parties related thereto triggers pro rata forfeiture of losses.
The forfeiture of losses is total when more than 50% of the shares
or voting rights are transferred. The statute covers both direct
and indirect transfers. The rules also operate when shares are
transferred to a group of purchasers with convergent interests.
The change-of-control rules were introduced into German tax law
with effect from 2008 and apply to transfers of shares on or after
1 January 2008.
A detrimental change in ownership does not exist if 100% of
the shares in the transferee and transferor are held directly or
indirectly by the same person (top management of the group)
(so-called group exemption provision). By the 2015 Tax Amend-
ment Act, the group exemption provision was extended to group
internal acquisitions with participation of the group’s parent
company (top management). In addition, individuals, legal enti-
ties, as well as commercial partnerships can be regarded as the
top management of the group. In addition, the rules provide that
unused tax losses of a corporation are not forfeited upon a share
transfer up to the amount of hidden reserves taxable in Germany
of the corporation’s fully taxable business property.