BMF issues circular on Section 8c(1a) KStG restructuring clause

The German Federal Ministry of Finance (BMF) has published a circular dated April 29, 2026, providing guidance on the application of the restructuring clause found in Section 8c(1a) of the German Corporate Tax Act (KStG). This clause allows for the preservation of unused tax losses when more than 50% of a company's shares are transferred to a new acquirer. Ordinarily, such a share transfer would lead to the forfeiture of these losses.

The BMF circular outlines that for the restructuring clause to apply, the company must be in need of restructuring and capable of being restructured. The share acquisition must also be conducted for restructuring purposes and be suitable for overcoming the company's financial distress. Crucially, the company's essential operational structures must be maintained, and the business operations should not be fundamentally discontinued. A change in industry within five years following the share deal will also disqualify the company from utilizing the clause.

The circular further details the conditions for "need for restructuring" and "capacity for restructuring." Need can be demonstrated by imminent insolvency or over-indebtedness according to insolvency law principles. The BMF specifically recognizes restructuring or reorganization plans prepared for insolvency law purposes, as well as expert reports from restructuring specialists, as valid evidence for these prerequisites.

To ensure the preservation of essential operational structures, companies must meet one of three criteria within five years of the share acquisition: comply with a concluded works agreement that includes workforce regulations, maintain payroll costs at or above 400% of the initial payroll total, or contribute substantial operating assets to the company through capital injections. These conditions are designed to ensure the business's continuity and viability post-restructuring.

If all stipulated requirements are met, the tax losses remain available and can be offset against future profits in accordance with the German Income Tax Act (EStG) and the Trade Tax Act (GewStG).