German Tax Law Update: New Rules for Business Restructuring

As of January 2025, Germany has implemented significant changes to its tax legislation affecting business restructurings, such as mergers and company conversions. The Bundestag passed the Annual Tax Law 2024 (Jahressteuergesetz 2024) in December 2024, which included amendments to the Transformation Tax Act (Umwandlungssteuergesetz, UmwStG). Following this, the Federal Ministry of Finance published its final updated guidelines (Umwandlungssteuer-Erlass, UmwStE) at the turn of the year.

A key change concerns the tax balance sheet (steuerliche Schlussbilanz) in cases where a capital company merges with a partnership or an individual, or undergoes a change of legal form. Previously, there was no statutory deadline for this tax balance sheet. The new § 3 Abs. 2a UmwStG now sets a deadline that aligns with the due date for the corporate income tax return for the period in which the restructuring became tax-effective. Furthermore, the tax balance sheet must now comply with electronic balance sheet (E-Bilanz) regulations.

The changes also impact the taxation of shareholders. For instance, under the revised § 5 UmwStG, all taxable shares held by private individuals in the transferring company, including those previously below the one percent ownership threshold, are now covered. Additionally, § 13 UmwStG introduces a new deadline for shareholders to apply for the continuation of book values (Buchwertfortführung), linking it to the due date of the shareholder's tax return.

The updated regulations for business restructurings are now more precise and require careful adherence. Notably, deadlines and electronic submission requirements have been tightened, which may influence the planning and execution of such transactions. These new rules apply to restructurings registered after December 5, 2024.