Germany: Amendments to stock law may require modifications to loss-transfer agreements

Guidance regarding an amendment to § 302 of the German Stock Corporation Act [AktG] (loss-transfer obligation)

Guidance regarding an amendment to § 302 of the German Stock Corporation Act

The German Federal Ministry of Finance (BMF) in March 2021 issued guidance regarding an amendment to § 302 of the German Stock Corporation Act [AktG] (loss-transfer obligation). The stock law amendment, effective 1 January 2021, may require the modification of existing profit-transfer agreements. 

Stock law amendment

In § 302 para. 3 sent. 2 AktG, the phrase "or restructuring plan" has been inserted after "insolvency plan.” This provision provides—particularly for profit-transfer agreements—the option of (partial) waiver of the loss compensation claim of the controlled entity in the event of insolvency proceedings regarding the controlling entity's assets. The amendment refers to an expansion of this regulation to the newly created restructuring plan.

Establishment of a tax group for income tax purposes requires an effective profit-transfer agreement. If the controlled entity is a German limited liability company (GmbH), the profit-transfer agreement must include a provision on loss transfer (assumption of losses) pursuant to § 302 AktG for tax purposes. With regard to the specific wording of the loss-transfer provision, the date when the profit-transfer agreement was concluded is decisive.

New profit transfer agreements that were or are concluded or amended after 26 February 2013 must include a "reference to the provisions of § 302 AktG in its respective wording" (a so-called dynamic reference). Existing profit transfer agreements concluded or last amended prior to 27 February 2013 need only contain "a transfer of losses in accordance with the provisions of § 302 AktG."

The German Federal Tax Court (BFH) has consistently held that this can be accomplished by full reference to § 302 AktG, by citing § 302 AktG verbatim or a combination of reference and citing the law. Furthermore the BFH has held that the reference to the provisions of § 302 AktG also refers to those regulatory components of § 302 AktG that had not yet taken effect on the date of conclusion of the profit-transfer agreement (in the case under dispute, insertion of § 302 (4) AktG in 2004).

BMF guidance

The guidance from the Ministry of Finance (BMF) on the modification of existing profit-transfer agreements (due to the amendment of § 302 (3) AktG) addresses existing profit -transfer agreements that were concluded or last amended prior to 27 February 2013, in which loss transfer was agreed by static reference to § 302 AktG (as applicable prior to amendment on 1 January 2021) or by citing this regulation verbatim.

  • A prerequisite for continued recognition of the tax group is that the previous agreements on the transfer of losses are amended in the profit-transfer agreement.
  • Loss transfer must be agreed by reference to the provisions of § 302 AktG in its respective wording (dynamic reference). In this situation, modification of the profit-transfer agreement to include a dynamic reference to § 302 AktG does not constitute a “new” contract for tax purposes.
  • A new five-year minimum term is therefore not initiated. An amendment is not necessary if a tax group ends prior to 1 January 2022.
  • The profit-transfer agreement concerned must be amended in 2021 at the latest, according to the BMF guidance.
  • Recognition of the tax group is not precluded for assessment periods starting 2021, if the existing profit-transfer agreement is amended to include a dynamic reference no later than 31 December 2021.
  • According to the BMF guidance, the controlled entity's resolution of approval as well as submission of a request to change the entry in the commercial register must be notarized.

Read a June 2021 report [PDF 330 KB] prepared by the KPMG member firm in Germany



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