BBH wins landmark judgment before the federal fiscal court in favour of limited companies

After many years of litigation, the Federal Fiscal Court (Bundesfinanzhof) issued a judgment of fundamental importance: from now on, the scope of application of the fictitious retroactive effect will be broadened for shareholdings of at least ten percent that were acquired during the year. Dividends may now be given privileged treatment in the year of acquisition even if shares were acquired from several sellers and each seller only transferred a participation of less than 10 percent. The Federal Fiscal Court thus follows BBH’s opinion.

The judgment clarifies the previously controversial requirements for the corporation tax exemption of profit distributions relating to intercompany participations in accordance with sec. 8b subs. 1 Corporation Tax Act (Körperschaftsteuergesetz – KStG) in the event that the shares were acquired during the year. Until now, it was clear that limited companies with a shareholding of at least ten percent in another limited company are privileged when it comes to profit distribution. Where shares are acquired during the year, a retroactive effect applies – at least if a minimum shareholding of 10 percent is acquired from a single seller. The Federal Fiscal Court has now clarified that it makes no difference whether there is one or several sellers. 

BBH partner Rudolf Böck, public auditor and tax advisor, is highly satisfied with the outcome of the proceedings: “Although the Federal Fiscal Court did not provide any guidance on the interpretation of sec. 8b subs. 4 sentence 6 Corporation Tax Act beyond the matter at hand, the judgment principally increases legal certainty for limited companies.”

BBH counsel and lawyer Hilda Faut, who handled the case for her client over several years, summarises: “The applicability of sec. 8b subs. 4 sentence 6 Corporation Tax Act is now no longer excluded per se in the case of an acquisition from several sellers. However, the specific requirements remain unclear. If you are planning to acquire shares, it is therefore still more than advisable to turn to an expert.”

The BBH group is a leading provider of advisory services for energy and infrastructure companies and their customers. Energy and supply companies, particularly public utilities, municipalities and local authorities, industrial companies and international groups are among its core clients. The BBH group advises these and many other companies and organisations in all legal matters and also assists them with business and strategic advice.

Prof. Dr. Ines Zenke
Rechtsanwältin/Lawyer, Partner
Phone +49 (0)30 611 28 40-179

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