Hinder the purchase and sale of tax losses
Under a provision designed to hinder the purchase and sale of tax losses, the
right to carry a loss forward is lost where more than 50% of the shares in a
company are acquired by a new or existing (foreign or domestic) shareholder
within a five-year period. If the holding acquired is more than 25% but not
more than 50%, the loss carry forward will be annulled in proportion to the
amount acquired.
Acquisitions of up to 25% do not lead to forfeiture of loss
carry forwards. Acquisitions can be direct or indirect, and there is also an
extension referring to related parties. This loss forfeiture rule does not apply to
group internal restructurings, that is, where the same person holds the
immediate or ultimate interest in the entire share capital of the company before
and after the transaction.
The rule is also disapplied to the extent the losses are
covered by hidden reserves in the company (measured as the difference
between the shareholders’ equity and the market value of the shares) and the
sale was a German taxable event.
EU Forecast
euf:ba18e:163/nws-01