With the draft of the Act on the Modernisation of Corporate Income Tax Law of 17 March 2021, the Federal Government has met a demand of the business community for more flexibility in the transformation tax law with regard to cross-border transformations of companies.
From 1 January 2021, according to the draft law, certain forms of transformations for groups of companies will not only be tax privileged within Europe, but will also apply to group companies based in so-called third countries. Up to now, tax-neutral mergers, splits and spin-offs as well as changes of legal form and transfers of assets were only possible between companies within the European Union. Now this restriction has been completely removed, so that these transformation processes are also possible in relation to third countries such as the USA, Switzerland and Great Britain.
However, as in the relationship with EU states, the prerequisite is that the German right of taxation is not restricted by the conversion process.
This measure is very welcome, as there was no convincing reason for putting companies in third countries in a worse position.
We would be happy to discuss these new possibilities with you and advise you on the conversion in terms of civil law and tax law.
