BBL: Green-yellow light from Brussels for tax exemption of restructuring profits

16. August 2018

EU Commission sees NO prohibited aid by § 3a EStG and § 7b GewStG.
The German legislation needs to become active again.

Berlin/Frankfurt a.M., August 15, 2018

In a letter to the Federal Ministry of Finance (BMF), the EU Commission has announced that it does not consider the tax exemption for restructuring profits created by the German legislature to be contrary to EU subsidy law. This is very good news for companies in need of restructuring and also for financial restructurings that already have been completed. Although the EU Commission did not take a corresponding decision on the state subsidy issue, it merely reacted to the request of the Federal Government with a so-called „comfort letter“. In our opinion, however, the legal reliability with regard to the tax exemption of restructuring profits is sufficiently secured.


In a decision published on February 8, 2017, the Federal Finance Court had made it virtually impossible to restructure companies in Germany. He ruled that the so-called reorganisation decree of the BMF violated the principle of the legality of the administration. On the basis of this reorganisation decree, the tax authorities had exempted taxable profits generated by waivers of claims by creditors.

This decision led to considerable uncertainty in remediation projects. The incentives that the legislature wanted to create through the so-called „ESUG“ (law to facilitate the restructuring of companies) were thwarted. The legislature therefore created a legal tax exemption for restructuring profits relatively quickly with § 3a EStG (“Einkommensteuergesetz”, Income Tax Law) and § 7b GewStG (“Gewerbesteuer Gesetz”, Trade Tax Law). However, the enactment of the law was subject to a resolution of the EU Commission, according to which the new regulation is not to be regarded as a prohibited subsidy. The EU Commission’s decision had already been eagerly awaited for many months.

Now it’s here, the decision. The content is as hoped for, but in the „wrong form“ – since the new regulations require a decision by the Commission but no decision has been taken, the legislator must take action again and delete the decision requirement in the already published amendments of the codes. It is expected that this will be done relatively quickly by „coupling“ the correction to another legislative procedure that is already in progress.

Despite the carte blanche from Brussels, it is possible that a German court sees the new rules as subsidy contrary to EU law and submits this question to the European Court of Justice. However, this risk would not have been eliminated by a resolution of the EU Commission. And the cases, in which it could come to a submission to the responsible court at all, are practically hardly conceivable. For the legislature and the tax authorities, the letter provides a sufficient basis for exempting restructuring profits from tax.

Practical consequences

The Communication of the EU Commission removes the biggest obstacle to restructuring in Germany to date. Reorganisations by means of insolvency plans and self-administration (again) receive the status which the legislator wanted to give them with the ESUG. However, all this will only apply if and when the legislature now acts quickly and removes the condition for the enactment of the law – the need for a decision by the EU Commission – from the law.

In addition, the following must be observed: The new rules only apply to cases where the creditors‘ waiver became effective after 7 February 2017. In previous cases, the BMF had instructed the tax authorities to continue to apply the old reorganisation decree. However, the Federal Fiscal Court has already rules out this order to be illegal by two decisions of 23 August 2017. In a letter dated 29 March 2018, the BMF then instructed the administration not to apply these principles of jurisdiction. Therefore, there should also be protection in the „old cases“.

Contact persons

Dr. Georg Bernsau Dr. Oliver Damerius
Zeilweg 42 Meinekestraße 27
60439 Frankfurt 10719 Berlin
Tel.: +49 69 963761-130 Tel.: +49 30 2007577-0


About BBL

BBL specialises in overcoming corporate crises both in the context of judicial and extra-judicial solutions. The firm develops and implements restructuring concepts. This also includes advising on crisis-related M&A transactions and carve-outs as well as distressed investments in a national and international context. BBL has a strong international connection due to numerous cross-border cases. Around 50 lawyers work at 11 locations nationwide and in London.
Further information:

Zurück zur Übersicht