Restructuring Decree

The Restructuring Decree is contrary to law – Red alert warning for companies threatened with insolvency

A recent decision by the Federal Fiscal Court (Bundesfinanzhof, BFH) will be of fundamental significance for the taxation of companies threatened with insolvency. According to a BFH ruling from 28.11.2016 (GrS 1/15), the tax concessions for “restructuring profits” (when creditors waive debt claims) that were set out in the Restructuring Decree of the Federal Ministry of Finance (Bundesministerium der Finanzen, BMF), in 2003, constitute a violation of the principle of legality of administrative actions. The Large Senate of the BFH has thus rejected a long-standing and reliable administrative practice. Will the legislature help in this respect?

For the time being, it will only be possible to achieve tax concessions for profits arising from restructuring on a case-by-case basis though equitable measures. The personal inequitability test will gain in particular importance in cases where there is a threat to the economic viability of the taxpayer through the tax on the “restructuring profits”.

Read more in PKF newsletter 03/17.

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