The tax consequences of a specifc reorganization depend both
on the general principles applying to all reorganizations and on
those applying to the legal form of the entities involved. The
tax consequences are codifed principally in the German Reor-
ganization Tax Act (Umwandlungssteuergesetz – UmwStG).
In principle, a corporate reorganization may have tax consequences
at the level of all entities involved in the reorganization, such as
the transferring entity, the receiving corporation, and the share-
In the Reorganization Tax Decree, the Federal Ministry of
Finance described its view of the different reorganization pro-
Tax due diligence review: A tax due diligence is often carried out
prior to a transaction. The scope and depth of a tax due diligence
will vary according to the size and complexity of the transaction.
A tax due diligence may include:
-Establishment of the tax status of the target
-Identifcation of tax risks
-Establishment of the effective tax rate of the target
-Support of cash-modelling
-Analysis of tax policy
The findings of the due diligence may have an effect on the
warranties granted under the sale and purchase agreement or on
the purchase price itself. They also serve to establish the factual
basis for the optimization of the transaction structure.