Various reorganizations and transactions are tax-privileged

Various reorganizations and transactions are tax-privileged in
accordance to the EU Merger Directive.

The Directive’s scope is
limited to specifc transactions (certain types of mergers, divisions,
transfer of assets, and exchanges of shares), not all of which are
familiar, or legally permissible, in all Member States. In broad terms,
the objective of the EU Merger Directive is to allow specifc types
of reorganizations to take place without triggering tax. In 2006,
German tax treatment of business reorganizations was revised in
response to changes in European law and to redefne the tax con-
sequences of inbound and outbound asset transfers.

The reorganization and restructuring of business entities in
Germany is governed principally by the German Reorganization
Act (Umwandlungsgesetz – UmwG), which provides a cohesive
set of rules that enable German business entities to change
their legal structure effciently to suit their needs in a changing
economic environment.