The German Federal Tax Court (BFH) in a late 2018 decision held that an application for retroactive consideration of a transfer (contribution) for tax purposes is not time-limited, but that such an application cannot be changed retroactively.
If a business in its entirety, a branch of activity, or partnership interests are transferred (contributed) to a corporation and the transferor is awarded new ownership interests in the company, in exchange, this is considered to be a “contribution of business segments” (non-cash contributions) pursuant to the German tax law on reorganization. On application, the effective date of these contributions, for tax purposes, can be set to apply retroactively up to eight months before the transfer. Thus, income and assets of the transferor (transferring entity) and transferee (acquiring entity) must be determined as if the business assets had been transferred to the transferee on the effective date, for tax purposes. The application must be filed by the transferee with the appropriate tax office.
In the case before the BFH, the taxpayer contributed a partnership interest in return for the issue of new shares in a Germany corporation limited by shares (Aktiengesellschaft—AG) at fair market value.
The issue was whether the effective date could be changed retroactively.
The court (BFH) concluded that a retroactive change was not permissible. While there was no time-limit for the application for retroactive effect, the court found it was not possible to change an application already filed retroactively.
Read a July 2019 report [PDF 305 KB] prepared by the KPMG member firm in Germany
Also discussed in this KPMG report are the following tax-related developments:
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