First tax law following Bundestag elections passed

Even though the Grand Co­ali­tion at the fe­deral le­vel did not of­fi­ci­ally come into being un­til mem­bers of the SPD de­ci­ded in fa­vor of it on De­cem­ber 16, 2013, the Ger­man par­lia­ment al­re­ady had pas­sed the cur­rent le­gis­la­tive pe­riod’s first tax law with a vote by the Bun­des­tag on No­vem­ber 28, 2013 and by the Bun­des­rat on No­vem­ber 29, 2013.

The law we are re­fer­ring to is the AIFM Tax Ad­just­ment Act. Yes, this law had been in­tro­du­ced into the le­gis­la­tive pro­cess in the pre­vious pe­riod. Howe­ver, be­cause the Bun­des­tag and the Bun­des­rat could not come to an agree­ment in the sum­mer, it ul­ti­mately fai­led pur­su­ant to the dis­con­ti­nuity prin­ci­ple. The dis­con­ti­nuity prin­ci­ple re­qui­res that any le­gis­la­tion still pen­ding at the end of a par­lia­men­tary term be drop­ped.

Un­der the lea­dership of North Rhine-West­pha­lia, a group of sta­tes pro­po­sed le­gis­la­tion ha­ving sub­stan­ti­ally si­mi­lar con­tent on Oc­to­ber 24, 2013.

Like the ori­gi­nal bill, the re­cently pas­sed law con­ta­ins a pro­vi­sion pro­hi­biting the re­co­gni­tion of hid­den lia­bi­li­ties when pro­vi­si­ons are sold or trans­fer­red wi­thin a cor­po­rate group. Only 1/15 of the busi­ness ex­pen­ses re­sul­ting from the sale or trans­fer can be char­ged to ex­pense im­me­dia­tely, with the re­ma­in­der de­duc­tible in sub­se­quent years in an­nual in­cre­ments of 1/14 (Sec. 4f EStG [In­come Tax Act]). In the first set of tax ac­counts pre­pa­red fol­lo­wing the ac­qui­si­tion, the en­tity ac­qui­ring the pro­vi­si­ons must re­co­gnize them as lia­bi­li­ties in the amounts that were tax-re­le­vant for the pre­vious debtor. This re­sults in a gain on ac­qui­si­tion, 14/15 of which can be placed in a tax-ex­empt re­serve. This re­serve, in turn, ge­ne­rally must be re­ver­sed into in­come in the amount of 1/14 per year (Sec. 5 (7) EStG).


The pro­vi­sion per­ta­ins not only to in­tra­group trans­fers, but also to trans­fers to third par­ties, es­pe­cially of part­nership in­te­rests. In prin­ci­ple, the new ru­les first take ef­fect for fis­cal years ending af­ter No­vem­ber 28, 2013. If an en­tity’s fis­cal year is the same as the ca­len­dar year, they are thus al­re­ady man­datory for 2013 and ap­ply to any trans­fers made since Ja­nu­ary 1, 2013.

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