More Comfort for restructuring measures via Share Deals by safeguarding losses carried forward?

In its letter dated April 29, 2026, the BMF issued a statement on the application of the so-called restructuring clause under Sec. 8c para 1a CITA. 

Sec. 8c para 1, sentence 1, CITA restricts the deduction of losses if, within a period of five years, more than 50 % of the subscribed capital, shares, or voting rights are transferred to an acquirer or to its related person, or to a group of persons with aligned interests (or if a comparable situation exists). During the 2008 financial crisis, Sec. 8c CITA was supplemented by a so-called restructuring clause, Sec. 8c para 1a CITA. According to this provision, an acquisition of shares in a loss carrying company shall not be deemed as detrimental if the acquisition is carried out for the purpose of restructuring of the corporation’s business operations.

The European Commission classified the restructuring clause as a state aid measure being incompatible with the internal market. However, the European Court of Justice (ECJ) overturned the Commission’s decision by judgments dated June 28, 2018 (C-203/16 P and C-208/16 P), thereby reinstating the restructuring clause retroactively as of 2008. Eight years after the ECJ’s judgments, now German tax authorities have issued their first circular on the restructuring clause.

The letter dated April 29, 2026, shall supplement previous letters regarding Sec. 8c and Sec. 8d CITA. Among others, the new letter clarifies the requirements of an acquisition of shares “for the purpose of restructuring,” considers special issues within corporate group structures, and stipulates guidelines for maintaining essential operational structures as more required under the provision of Sec. 8c para 1a CITA. We have summarized selected key points from the recently issued letter as follows:

Acquisition of shares for restructuring purposes

• The acquisition of shares must be made for the purpose of restructuring of the corporation’s business operations, whereby restructuring is defined as a measure aimed at preventing or eliminating the corporation’s insolvency or excessive indebtedness while simultaneously preserving its essential operating business.
• The application of the restructuring clause requires, according to the professional assessment of an objective third party, the corporation’s need and its capability for restructuring at the time of the shares acquisition, and that the restructuring measures are suitable for preventing or eliminating insolvency or over-indebtedness.
• The corporation must submit documents that provide verifiable evidence of (i) its need for restructuring, (ii) the acquirer’s intention to restructure it, and (iii) the planned restructuring measures. A reorganization plan prepared for purposes of insolvency law (Sections 217 et seq. German Insolvency Code) or a restructuring plan should suffice as evidence if the acquisition of shares is part of the entire reorganization or restructuring plan. The same shall also apply to a restructuring report prepared for third parties in accordance with a method customary in ordinary business transactions for non-tax purposes (e.g., in accordance with IDW S 6).
• A causal link between the acquisition of shares and the reorganization shall only exist if the share acquisition takes place at a time when the corporation is facing or has already fallen into insolvency or over-indebtedness.

Group-Related Matters

In corporate group structures, the factual requirements of the provision must be examined separately for each loss-making company (directly and indirectly).

Retention of corporation’s essential operating structures

The application of the restructuring clause requires the preservation of the corporation’s essential operating structures. This shall be assumed if the corporation meets (at least) one of the following conditions:

• Existence of a works frame agreement with provisions regarding continuing jobs,
• Compliance with the aggregate wage regulation, or
• The injection of significant business assets through contributions.

The contributions to the corporation must be made within 12 months of the acquisition of the shares and correspond to at least 25 % of the book value of the assets shown on the tax balance sheet as of the end of fiscal year before the acquisition. A waiver of liabilities shall be treated as a contribution of new business assets, provided that the claims are recoverable. This shall also apply if the liability is waived in exchange for debtor warrant (Besserungsschein).

Transfers of assets in connection with conversions and contributions shall be treated as an addition of business assets to the loss-carrying corporation, to the extent that such transfers result in an increase of the corporation’s tax equity. Contributions under German Corporate Restructuring Act (UmwStG) shall be recognized in the amount in which the contributed business assets or shares are valued by the acquiring company (i.e., fair market value, intermediate value, or book value).

Exclusion of the Restructuring Clause

The application of the restructuring clause shall be excluded if the corporation has essentially ceased its business operations at the time of the shares acquisition or if a change in industry occurs within a period of five years following the acquisition of the shares.

Legal Consequences

If the restructuring clause applies, the acquisition of the shares made for the purpose of restructuring shall be irrelevant for the purposes of Sec. 8c para 1 CITA. Thus, this acquisition of the shares shall not result in the (complete) forfeiture of company’s (current) tax losses and losses carry forwards. Further, this acquisition of shares shall be aggregated with other shares transfers made within the five-year period as more specified in Sec. 8c CITA.

Conclusion

The publication of the BMF letter on the restructuring clause is certainly welcomed and serves as an important guideline for taxpayers in addressing questions in relation to the forfeiture of tax losses in the context of a transfer-based restructuring via share deals. However, the restructuring clause remains a comprehensive provision with high administrative and strict operational requirements to be fulfilled. For the tax authorities, compliant continuance of the essential operational structures represents the key element while apply the restructuring clause. Thus, taxpayers should strictly adhere to the prescribed requirements to avoid the adverse legal consequences of the retroactive non-application of the restructuring clause. If the restructuring clause was not applicable, the acquisition of shares must be retroactively included into the 50 % threshold within the five-year period. As a result, the retroactive event may relate to a different tax assessment period and exceeding the 50 % threshold would lead to a full forfeiture of current tax losses and loss carry forward.

It should be noted that proceedings regarding the constitutionality of tax loss deduction for corporations are still pending before the Federal Constitutional Court (Case No. 2 BvL 19/17). In a decision dated August 29, 2017 (2 K 245/17), the Hamburg Fiscal Court referred the matter to the Federal Constitutional Court to determine whether the complete forfeiture of tax losses is constitutional in the event of share transfers exceeding 50% of the corporation’s equity.