Abuse prevention provisions in conversion tax law – Critical analysis of the blocking period rules

AbzStEntModG | Deduction tax relief modernization law

VerwaltungshilfeRLUmsG | Administrative Assistance Directive Implementation Act

SEGMENT002 TFEU | Treaty on the Functioning of the European Union

a.F. | old version

AO | Tax Code

BFH | Bundesfinanzhof

Brexit-StBG | Law on tax and other accompanying regulations for the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union

BStBL | Bundessteuerblatt

CGI | code général des impôts

DTA | Double Taxation Agreement

EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization

EC | European Community

Treaty establishing the European Community

EStG | Income Tax Act

ECJ | European Court of Justice

FRL | Fusion Directive

GG | Basic Law

GewStG | Business Tax Act

GmbH | Company with limited liability

JStG | Annual Tax Act

KG | Capital Company

KGaA | corporation on shares

KStG | Corporate Tax Act

OHG | open commercial company

RAO | Reichsabgabeordnung

SCE | European Cooperative Society

SEStEG | Law on tax accompanying measures for the introduction of the European company and the amendment of further tax legislation

UmwG | conversion law

UmwStG | Conversion Tax Act

VVAG | Mutual insurance association

Growth Acceleration Act

Restructuring is beneficial in the business world in many and very different situations for the companies involved. In order to make such processes possible, the legislature has created opportunities to implement them tax-neutrally. However, they can also be used to sell companies without having to pay taxes on the capital gains. That is why the legislature has introduced regulations in conversion tax law that are intended to prevent such abuse. In particular, the individual blocking periods are given great importance. However, this approach also has some disadvantages. Thus, the introduced abuse prevention provisions in conversion tax law do not in any way comply with the requirements of the EU Merger Directive, which excludes a general typification of abuse assumptions.

Companies must be constantly changing to meet the demands of the times. However, this includes not only developments in the corporate concept but also changes in the corporate form. In order not to tax these economically necessary restructurings, the Conversion Tax Act allows tax-neutral conversions. Like many other provisions of the law, the relief of conversion tax law would in principle offer many opportunities to abuse it.

According to the definition of § 42 AO, an abusive arrangement exists “if an inappropriate legal arrangement is chosen which leads to a tax advantage not provided for by law by the taxpayer or a third party compared to an appropriate arrangement” (§ 42 para 2 p. 1 AO). To put it simply: If legal loopholes are exploited that the legislature did not provide for. In the context of conversions, the abuse prevention provisions of conversion tax law apply. These are necessary in order to enable taxation on the basis of economic performance, which is not distorted by arrangements. This eliminates distinctions in situations based solely on corresponding designs,[1] so that only the objective performance of the individual is decisive. The absence of such avoidance rules would result in a well-advised taxpayer obtaining a significant tax advantage to a less well-advised taxpayer at the expense of the general public. [2]

It is often discussed in the media that companies are founded in other countries (so-called tax havens) in order to be taxed less or even not at all. This may raise the question of whether there is an abuse of design, since the other country is chosen solely on the basis of the tax advantage and not on the basis of other economic interests. In this regard, the decision of the ECJ of 12 September 2006 in the case of Cadbury Schweppes can be considered. Although it has been proven that the company was created in Ireland only on the basis of the possibility of benefiting from certain tax advantages, the ECJ ruled that the pursuit of tax relief does not in itself constitute an artificial construction and, consequently, an illegal tax arrangement. [3] The situation is different, however, if only a fictitious registered office of a company is transferred abroad due to tax advantages. [] 4]

Since in many cases the legal situation for determining the misuse is not clear, the conversion tax law uses the blocking periods. These lead to a (possibly retroactive) taxation after presentation of corresponding conditions within the deadlines. The legislator thus irrefutably demonstrates that abuse occurs within this period.

The existing blocking periods lead, in the opinion of the author, in particular due to the irrefutable assumptions, to the following questions: Are the deadlines established by the legislator proportionate? Are these in line with the European Union's Fusion Directive? Is it possible to circumvent the deadlines?

Before further explanation, however, it should be noted that tax avoidance is not punishable like tax evasion. Only in the rarest cases does tax avoidance lead to tax evasion. [5] For there to be tax evasion, the facts of § 370 AO must be fulfilled. However, it already fails on the objective facts, since in the case of misuse of design no false or incomplete information is communicated to the tax office, but the complete facts are presented. [] 6]

The present work is divided into the following substantive capital: First, the meaning and purpose of the conversion tax law is presented.

This is followed by the tax systematic classification of the abuse prevention regulations, since the legal regulations can basically be divided into three tax purposes. This should initially serve for a better understanding of the regulations.

In the next step, explanations are made about § 42 AO, which represents the general abuse prevention norm. Here, the relationship between the general norm and the special legal norms for avoiding abuse is discussed, referring in particular to the internal and external theory developed in the literature, which deals with the necessity of general regulation.

This is followed by explanations of the individual abuse prevention provisions of conversion tax law. In principle, the blocking periods are the focus here, but for better understanding, more precise explanations of the corresponding tax-relieving standards are also provided.

After an interim conclusion, the seventh part compares the abuse prevention regulations of the Conversion Tax Act with the requirements of the Merger Directive, which contains the regulations of the European Union on cross-border conversions. In particular, it deals with the statements of the ECJ, which, as set out in the chapter, rejects presumptions of typifying abuse.

Before the author’s opinion is presented in the conclusion and a possible solution to the breach of the principle of proportionality is presented, the Porsche/VW case is presented, which was often to be found in the media in 2012, as the tax burden was circumvented by permissible arrangements offered by conversion tax law despite existing blocking periods.

The Income Tax Act and the Corporate Income Tax Act contain the principle of individual taxation (subject taxation), i.e. each individual has to tax his earned income in principle. [7] Subject can be anyone who can also be the bearer of an economic capacity, thus natural as well as legal persons. [8] It should be noted here that even hidden reserves already lead to an increase in economic performance and thus should basically already be subject to taxation when they exist. However, from this

Foresee reasons of proportionality and only apply taxation if

the respective asset is removed or sold. [] 9]

The merger of two companies, for example, leads to the two companies being terminated under private and tax law. [10] Consequently, any type of conversion involving a transfer of assets would trigger a taxable operation, since the hidden reserves are transferred to another taxable entity and thus the realisation of the hidden reserves is fulfilled. [11] However, the performance of companies has not increased since no cash has flowed, so taxation would be a heavy economic burden for all the companies involved in the transfer of their assets. [] 12]

In order to prevent such a burden, the conversion tax law applies, whereby also in the income tax and corporate tax law individual regulations are found, which are intended to prevent immediate taxation. However, the conversion tax law in particular enables conversions that are neutral in terms of performance. Consequently, companies may request that the book values be continued and that hidden reserves be realised only when the item is actually sold or, if necessary, removed.

But why should the legislature waive a tax obligation if the requirements of a taxation are met? The reason for this is that the conversions are not primarily regarded as operations which generate revenue but are intended to maintain or improve the acquisition base. An indication of this is that the granting of shareholder rights is usually agreed in return or there is no consideration. Other considerations are permitted to a limited extent under conversions. [] 13]

The conversion tax law includes, in summary, the income tax treatment of the change in the legal form of a company by merger, division and separation, transfer or transfer of assets. Transfer of assets and change of legal form. The sales and trade tax consequences can be found in the individual tax laws. [] 14]

An essential aspect of the conversion tax law is therefore not to restrict or even impair restructurings that are desirable for business purposes and are possible under commercial law by tax consequences. [] 15)

Legislative regulations can basically be divided into three tax purposes. These include fiscal, social and simplification standards. Consequently, before further explanation, the rules for avoiding abuse must first be classified. [] 16]

Fiscal standards serve to raise funds for the state budget.[17] They are based on the personal performance of the taxpayer. This includes both tax-burdening and tax-relief schemes. [18] Although abuse prevention rules do not have an independent revenue-generating purpose, they serve to secure revenue by preventing the taxable person from using unintended arrangements for his benefit. [] 19]

As the term implies, the purpose-of-steering standards are rules intended to guide the taxable person’s behaviour by favouring or burdening him. [20] These include, for example, the tobacco tax and the tax on alcoholic beverages, which are intended to reduce consumption by virtue of taxation. While fiscal purpose norms usually refer unintentionally to the behavior of

Taxpayers can have an impact, but this is often intended with the abuse prevention norms as steering purpose norms. The norms should not only have a deterrent effect in the consequences, but also in the often complicated and unclear legal formulation. [] 21]

The simplification purpose standards include flat-rate and typed regulations, which are both rebuttable, such as the advertising flat-rate amount acc. § 9a EStG, as well as irrefutable, such as the savings lump sum according to § 20 para. 9 EStG. According to the Hamburg Finance Court, typification means normatively summarizing “certain life issues of the same kind in essential elements”. Special features that are well known in fact can be neglected in a generalizing manner

become. “[22] While the rebuttable typification does not result in any disadvantage for the taxpayer, this may be the case with the irrefutable typifications. For example, while the savers lump sum has a positive effect on taxpayers excluding advertising costs on capital income, it is detrimental to taxpayers who have higher advertising costs, since the excess amount is not taken into account. [23] However, this effect does not constitute the primary intention of the simplification rules, but is only a secondary consequence of the simplification.[24] By applying exemption amounts, exemption limits and time limits, special provisions for the prevention of abuse also serve to simplify. As a rule, however, these are irrefutable typifications that emphasise simplification again, since this does not create any potential for discussion, since fulfilling the statutory provisions leads to legal consequences. This gives the taxpayer legal certainty, since the interpretation of an abusive design often offers a lot of room for interpretation.

The abuse prevention norms are therefore simplification purpose norms that serve to enforce fiscal purpose norms. [] 25]

§ 42 AO constitutes a general abuse prevention provision. The provision is based on § 5 RAO 1919, which sets out the first general regulation regarding abusive design. Even then, the specific abuse avoidance norms proved insufficient to include all abuse cases. [26] After the entry into force of § 42 AO 1977 took place after long criticism regarding of the inaccurate wordings a new substantive change of the standard by the annual tax law 2008, which in particular explains the interaction with individual tax laws in more detail. The new regulation will be applied for abusive arrangements from 01.01.2008. [] 27]

It can be seen from paragraph 2 of the standard that there is abuse if an inappropriate legal arrangement is chosen that leads to an unintended tax advantage. According to § 38 AO, a tax liability arises if the facts to which the law attaches the obligation to perform are fulfilled. Accordingly, the facts of the case would have to be arranged in such a way that the facts of the respective law are not fully fulfilled and consequently the tax liability does not arise.

comes (legal consequence avoidance). However, tax avoidance also includes the fact that the statutory facts of a favourable standard are fulfilled by the design and the facts are therefore to be treated tax-free (legal successor slip). [] 28]

An arrangement within the meaning of § 42 AO exists if economic transactions are covered by the tax event. This therefore does not include legal relationships. If, for example, a marriage is concluded only for tax purposes, there is no tax avoidance within the meaning of the tax code.[29] The renovation of the rented apartment, which is carried out with the aim of reducing the tax burden, does not constitute an abusive arrangement. The basic problem of the regulations is to be able to differentiate clearly when an abuse of rights and when only a permissible use of legal design possibilities exists. [] 30]

§ 42 AO precludes the principle of freedom of design, which arises from Articles 12, 14, 2 para 1 GG. [31] From this principle, one could conclude that everyone would be free to make arrangements in such a way as to avoid taxes. However, a distinction should be made between the words ‘tax avoidance’ and ‘tax avoidance’. A design of the facts that leads to a tax payment being avoided is not unlawful, since no one is obliged to make decisions that lead to a realization of the facts. However, tax avoidance considers that a legal consequence of the respective law should in principle affect the taxpayer, but this is circumvented by the design of the facts and this design does not include any other (e.g. economic) advantages apart from the tax advantage.

Due to their inaccuracy, the words “abuse” and “inappropriate” used in the law do not in themselves constitute terms on the basis of which decisions regarding the existence of a tax avoidance can be made. In order to be able to accurately assess when a design within the meaning of § 42 AO is available, it must first be clarified what these terms include. The law does not provide a definition for this, but it can be deduced from established case-law[32] that the appropriateness must be examined in particular if the arrangement without the tax effect does not seem economical, cumbersome and complicated. It should be noted, however, that an unusual design alone does not justify inappropriateness. It is therefore necessary to assess whether the arrangements are to be considered inappropriate by considering all the circumstances in individual cases.

Since the wording of the law indicates that a conscious action of the taxpayer must be present, the intention of abuse could be derived from this. This was the case in the original version of the standard.[33] In this respect, however, the law was amended. According to the current version, the tax administration no longer lies in the burden of proof of the intention to abuse,[34] rather, the taxpayer has the wording in § 42 para. 2 S. 2 AO to provide a counter-proof.

Furthermore, some authors have already dealt with the necessity of the standard. Two theories for avoiding tax avoidance have developed. On the one hand, the “inner theory”, which states that one should orient oneself to the sense and purpose of the circumvented norm in order to establish a circumvention and that § 42 AO is therefore superfluous. On the other hand, the “external theory”, in which § 42 AO is seen as an independent norm with its own criteria. In particular, Dr. Peter Fischer[36] takes the view that § 42 AO is not necessary in principle. If one considers the meaning and purpose of the rules and does not merely strictly follow the wording, one can, in his opinion, also determine the tax avoidance under the individual tax laws. The concept of the master plan plays an important role in this regard. Although this does not come from the tax laws, it has already been used in some jurisdictions. [37]

A plan basically aims to implement individual measures that pursue a goal. The overall plan concept states that one does not pay attention to all the small steps that lead to a goal, but fabricates an entire situation from the individual situations. This leads to the fact that not every step is assessed individually and thus possibly a tax avoidance is denied, but one filters out the goal and tries to determine whether the previous decisions were made solely to achieve this goal. On the basis of the fictitious facts and the sense and purpose of the corresponding standard, it is then to be recognized whether a tax avoidance is given. § 42 AO would therefore only have a declaratory effect. Whether the overall case consideration is actually possible, however, is doubtful.

Söffing, for example, represents that intention is an internal fact that must be established by external circumstances.[38] This alone is already difficult to prove, since the exact reasoning of the taxpayer cannot be explained and can therefore be easily refuted. In addition, tax avoidance cannot be derived from every norm, which gives § 42 AO a constitutive meaning.[39] From the point of view of the taxpayer in particular, the internal theory is an inappropriate approach. If the meaning and purpose of each rule must be interpreted by the respective judge, the taxpayer loses confidence in the wording of the law, which creates planning uncertainty. Nevertheless, a correct application of the standards would lead to legal certainty, which § 42 AO does not offer due to the inability to subsume. For this purpose, the terms “abuse” and “inappropriateness” used in the standard are still too unclearly defined for decisions to be based on this alone. [40] However, it is considered that especially the renewal of § 42 AO by the JStG 2008 makes it clear that the legislature considers the external theory to be appropriate. This assumption is supported, inter alia, by the fact that explicitly intended characteristics are defined by the standard (“inappropriate design”). [41]

The special law abuse prevention norms are basically simplifications, since the “abusive design” mentioned in § 42 AO is defined more precisely in the individual laws by typifying the abuse case. These typifications are intended to facilitate the detection of abuse by providing precise specifications for detection. However, simplification is difficult in practice. Whether an abuse avoidance norm reaches the actual goal can only be determined over time. Since the legislator tries to prevent all possibilities of abuse in the special law abuse prevention norms, legal loopholes can also arise in these regulations, which, however, only become clear in the course of practice. This results in many additional derogations, which can then not lead to simplification, but rather to complications of the regulations. [43] This is usually accompanied by complicated formulations, such as those of § 15a EStG or § 4 Abs. 4a EStG, which were also not rarely discussed in jurisprudence. On the basis of this created problem, it is considered that an examination of the necessity and limitations of the special regulations must be carried out.[44]

In order for a special legal abuse prevention standard to be available, it is necessary that the abuse is concretized in temporal, factual and personal terms. [45] According to settled case law[46], the legislature is entitled to apply such typifications for reasons of administrative simplification. However, this must be based on realistic scenarios. It is therefore not sufficient if an abstract risk of abuse is the basis for a general regulation.

When determining such typifications, legislators must, however, observe the principle of proportionality. The principle of proportionality is an aspect of the rule of law and is therefore out of the ordinary. 20, 28 para 1 GG. In order to comply with this principle, the means must be appropriate, necessary and proportionate. From the decisions of the Federal Constitutional Court on (irrefutable) typifications[47], it can be concluded that these are also permissible in the case of abuse prevention, if this also includes cases that have no corresponding intention to abuse.

In the old version of § 42 AO, there was no precise indication of how the general norm relates to special law abuse prevention norms. In the original version, § 42 AO could only apply if it was not expressly excluded by the special standards. In contrast, the case-law was not guided by the formulation of the norm, but held that the special norms excluded the general one.[48] The individual tax laws therefore had a weighting priority.[49] However, since no conclusive regulation of any kind of abuse can be made in the individual norms, § 42 AO does not lose its meaning. [] 50

The JStG 2008 introduced the second sentence of paragraph 2. This now regulates that special abuse prevention regulations have priority, but does not exclude § 42 AO. As a result, unlike in the past, the requirement will apply from that date onwards alongside the other regulations. This means that it must first be examined whether an individual tax law applies to the individual case. If the requirements of the special law abuse prevention standard are not met, § 42 AO must be examined in the next step. [] 51]

Despite the change in the legal formulation, the literature and the financial administration did not take the same view. While the tax law literature[52] assumed that the special avoidances of abuse excluded § 42 AO if they regulated the case under assessment in principle, but the facts were not fully true, the tax administration took the view that the special norms constituted an extension of § 42 AO and the application of the general norm

therefore not exclude. [] 53

By judgment of 17.11.2020[54] the BFH made a statement on the relationship of § 42 AO in the version of the JStG 2008 to the special legal standards. The BFH commented as follows:

“Unlike earlier versions, § 42 AO in para. 1 sentences 2 and 3 now an express regulation on the relationship between individual tax law circumvention prevention regulations and the abuse clause of the AO. The wording leaves no doubt that such individual tax provisions only displace the application of § 42 AO if they are actually relevant. If they are actually not relevant (“otherwise”), then § 42 AO is not expelled. ‘ [] 55

The BFH therefore clarifies in its judgment that there is no exclusion of § 42 AO simply because regulations were made in the individual tax laws regarding the facts. It is then also explained that in principle a recourse to § 42 AO is possible, but the explanations of the special norms must be taken into account in an assessment in order to avoid a contradiction of evaluation. This is particularly the case for rules which would include strict delimitation features which provide legal certainty for the taxable person. The sale in the event of a dispute outside the blocking period of § 8b Abs. 4 KStG, as amended by the Tax Reduction Act of 23.10.2000, therefore led to the fact that no misuse could be found. [] 56

This view also goes hand in hand with the aim of the special standards to simplify, since recourse to § 42 AO would prevent this. [] 57]

The Conversion Tax Act provides a variety of abuse avoidance norms that include both rebuttable and irrefutable typifications.

§ 2 UmwStG regulates the tax retroactive effect of conversion operations. The standard contains an exception to the general principle that legal transactions with fiscal effect cannot be referred back. [] 58]

5.1.1. Scope of application

The standard is in the 1st part of the conversion tax law, which contains the general regulations. On this basis, it could be assumed that § 2 UmwStG applies to all conversions. Regulations relating to a transferring entity result from the standard. This means that only one application can be made for the 2nd to 5th part of the conversion tax law. The 6th and 7th part is excluded due to own back-relationship regulations. 59]

5.1.3.

§ 2 Abs. 1 UmwStG stipulates that the tax consideration of conversions does not take place only upon entry into the commercial register, but already with the date of the commercial balance sheet on which the conversion is based. Under civil law, the transferring entity continues to exist in the period between the tax transfer date and the entry of the conversion in the commercial register, while for tax purposes the transferring entity has neither income nor assets.

is included. [60] The standard constitutes a simplification, since it dispenses with a final fiscal balance sheet at the time the merging company expires. [61] Furthermore, the standard promotes the planning security of the participants. [] 62]

In contrast to § 20 para. 6 UmwStG, the application of § 2 UmwStG is not a right to vote. [] 63]

5.1.4. Exclusion from retroactivity

According to § 2 Abs. 3 UmwStG, the retroactive tax effect does not apply insofar as income would not be taxed abroad due to a different regulation. This is usually the case if the other State does not carry out any retroactive taxation or a shorter retroactive taxation and consequently no taxable income is generated by the retroactive effect in Germany from the drawing up of the balance sheet. [] 64

Usually, the regulation applies to the merger of a German corporation with a foreign one. If countries set different reference dates and there would be a sale of an asset between the reference dates, this would result in no taxation of the capital gains in any country. [] 65]

5.1.5. The loss utilization restriction of § 2 Abs. 4 UmwStG

§ 2 Abs. 4 UmwStG constitutes a misuse prevention provision due to the restriction of the use of losses. Sentences 1 and 2 serve to prevent the transferring entity from using losses, which is made possible solely by the tax retroactive effect fiction. The use of losses includes non-compensated negative income, an interest carry forward according to § 4 h Abs. 5 EStG and an EBITDA lecture according to § 4h para. 1 p. 3 EStG. This includes in particular the prevention of loss loss according to FIG. §8c KStG.[66] A prerequisite for taking such a loss into account is that it would have been applied even without tax retroactive effect.

The purpose of the regulation is to prevent the loss loss acc. §8c KStG is circumvented. [67] In order to verify whether such an arrangement exists, a comparison of the situation with and without tax recourse must be made. If it turns out that only the recourse to § 2 UmwStG made it possible to take loss into account, the loss is not to be offset.

The abuse prevention standard applies if a harmful acquisition of a shareholding arises between the tax transfer date and the conversion decision in accordance with § 8c KStG. If there were no tax reference and the reference date corresponded to the civil law and thus to the registration in the commercial register, the loss incurred by the transferring company would not have to be taken into account in the context of the conversion and thus not offset against the transfer profit. However, due to the drawback, the billing is basically made possible. Consequently, there is no loss utilization. [] 68]

§ 6 UmwStG is in the 2nd part of the Conversion Tax Act and thus refers to the conversion of corporations into partnerships or sole proprietors. On the basis of §§ 12 para 4, 23 para 6, 24 para. 4 UmwStG is also applied in the case of a merger and division of corporations and in the case of submission processes. [] 69

Cross-border mergers are also covered if the acquiring entity is subject to unlimited taxation in Germany. [70] The standard does not apply to the transfer of assets to a legal entity without assets.[71] The temporal scope of § 6 UmwStG is limited to conversions which were entered in the public register after 12 December 2006 and thus after publication of the new version in the BGBI. [] 72]

5.2.1. Use case

There is a possibility that claims or claims between the merging entity and the acquiring partnership may arise. liabilities which then expire as a result of the merger. This process is also known as confusion. In principle, there is no profit at the expiration of these two items, as a regular recognition in the same amount and the values are thus balanced. However, there is a possibility that the receivable has been written off and that there is a profit after the expiration of both items. [73] The takeover profit arising from the confusion is a current profit, which is subject to income tax or corporate tax as well as trade tax, but not to the takeover profit according to § 4 para. 7 UmwStG and thus cannot be offset with a takeover loss. [] 74

The same applies to provisions created as a result of uncertain liabilities vis-à-vis the other legal entity, since as a rule no corresponding claim is accounted for by the other legal entity. § 6 Abs. 1 UmwStG entitles the assuming legal entity in the marketing year of the tax transfer date to make a provision in the corresponding amount. This is then in the three following years to at least one third each

Resolving to increase profits. If the assuming legal entity is a partnership and a profit is generated on the basis of a claim from the special business assets of a shareholder, according to § 6 Abs. 2 UmwStG a corresponding application of § 6 Abs. 1 UmwStG.

However, the regulation does not apply if the assets are not operating assets of the assuming legal entity within the meaning of § 8 para. 1 S. 1 UmwStG. 75

5.2.2. The blocking period

according to § 6 Abs. 3 UmwStG, the provisions of paragraphs 1 and 2 shall cease to apply retroactively if the acquiring entity transfers the business transferred to it to a limited liability company within five years after the tax transfer date or sells or ceases without valid reason. Consequently, the adjustment notices, measurement notices, exemption notices or assessment notices issued should be amended and the profit should be taken into account in full in the marketing year of the tax conversion date. As a result, the profit in subsequent marketing years should be reduced by the increase in profit resulting from the cancellation of the provision. The reason for the retroactive discontinuation of the scheme is that it can be deduced from the subsequent restructurings that the conversion operation which led to the formation of reserves was not necessary and therefore there was no reason for the formation of the beneficiary reserve. 76

The five-year period starts from the tax transfer date. A sale or transfer between the tax transfer date and the registration in the commercial register would thus also lead to a harmful process.[77] Disposal is the date on which the assets cease to be attributable for tax purposes to the acquiring entity. [] 78]

Regarding the transfer of all essential operating bases of the assets previously acquired by the conversion is assumed.[79] The functionally and quantitatively essential operating principles are decisive. A transfer (introduction or disposal) of a part of the business thus does not lead to a breach of the blocking period. [] 80]

It is striking that the standard does not contain an irrefutable presumption of abuse if a sale or abandonment takes place within a period of five years, since there is no retroactive taxation if there is a valid reason for the sale or abandonment. Thus, a refutable typing is present. However, this does not apply to the transfer to a limited liability company. However, when a valid reason exists and when not, is not explained in more detail. BFH judgment of 19.12.1984[81] denies this if a sale within five years was already foreseeable at the time of the conversion. However, if the decision to dispose of or abandon is made in current business transactions after the conversion process, it must be examined whether a disposal or abandonment has taken place solely because of the changes in the company and whether this represents an economically viable solution. In the case of a sale or abandonment, the taxpayer must provide the tax office with proof that it was not motivated by the tax avoidance. However, the financial administration bears the burden of proof for the absence of a valid reason. [] 82

The reason for the rebuttable presumption could be that the blocking period is intended to avoid favouring unnecessary conversions. If a sale or abandonment took place after conversion, it cannot generally be concluded that the conversion was not necessary. Accordingly, this is not a typical case which can be used as the basis for an irrefutable presumption of abuse. As a result, there is first a presumption of abuse, which can invalidate the taxpayer.

§ 15 UmwStG applies to divisions, separations and partial transfers from one body to another body. For cases of division and separation to partnerships, a provision was made in § 16 UmwStG.

5.3.1. Prerequisites of the book and interim approach

according to § 15 para. 1 UmwStG for the valuation of the transferred assets, a corresponding application of §§ 11 – 13 UmwStG takes place, which in principle prescribe an approach of the common value, which leads to the discovery of all hidden reserves. If a branch is the subject of the transfer (division) or a branch remains with the transferring entity (division and partial transfer) and the remaining requirements of § 11 para. 2 UmwStG, an approach may be

with the book value or an intermediate value, whereby a profit realization is partially or comprehensively avoided. [] 83

Furthermore, it is important that all assets being transferred form part of an enterprise (exclusive requirement). An additional transfer of individual assets thus leads to the exclusion of the book value or intermediate value approach. This does not apply to the part of the operation remaining in the spin-off, i.e. as long as a part of the operation exists, individual assets not assigned to the part of the operation may also remain (minimum requirement). [84] However, this differentiation cannot be inferred from the wording of the law. Rather, an interpretation was made out of the sense and purpose of the regulation, since it regulates the (prevented) discovery of the hidden reserves of the transferred assets and not of the survivors. [] 85

5.3.3. Avoiding abuse

In § 15 para. 2 UmwStG two regulations are to be found, which should avoid the abuse of the standard. Both regulations exist independently of each other.

5.3.3.1. § 15 para. 2 S. 1 UmwStG

§ 15 UmwStG favours the transfer of a part-operation or the fictitious part-operation (participant share or 100 % share) and does not favour the transfer of individual assets. However, without the abuse prevention requirement of paragraph 2, the tax-advantaged transfer of individual assets shall be made possible. If a shareholder wishes to transfer an economic good from one corporation to another in a tax-neutral manner, he only has to transfer the economic good to a newly founded partnership acc. § 6 Abs. 5 S. 3 EStG with the book value and then the acquired shares in the partnership according to § 15 para. 1 UmwStG tax neutral in the other corporation. [86] This arrangement is defined by the regulation in § 15 para. 1 umwStG avoided, because this states that the submission to

book value or interim value of co-entrepreneur shares and participations acquired or increased within a period of three years before the tax transfer date by transfer of assets which are not branches of business. With regard to the co-entrepreneur shares, this also includes any contribution and transfer of assets containing hidden reserves to the total assets/special assets within the three-year period, since this increases the shareholding. [87] The standard is

therefore not relevant for splits and separations of other branches. In such cases, the branches may have been established shortly before the transfer. If, however, a share of the co-entrepreneur or a 100% shareholding has fallen behind in the separation, the misuse prevention regulation must also be checked here. [] 88

The regulation constitutes a blanket abuse prevention provision that does not allow for the possibility of counter-evidence.[89] As a result, it is possible for processes which, due to small amounts or similar reasons, obviously do not constitute an abusive design to be covered by the standard and, in such case constellations, for the standard to be covered, e.g. is considered disproportionate. [] 90]

5.3.3.2. § 15 para. 2 S. 2-4 UmwStG

In addition to the regulation of § 15 para. 1 UmwStG, sentences 2 to 4 contain a further abuse prevention provision. The provisions of § 15 Abs. 1 UmwStG allow the taxpayer in principle a favourable sale to a third party. This is done in several processes. If a limited liability company consists of several branches of business and a branch of business is to be sold to a third party, a taxable capital gain arises first. However, in order to circumvent this, the taxpayer could convert the part-operation into a newly formed corporation at book values according to § 15 para. 1 UmwStG and then sell the shares in the limited company to a third party in accordance with § 3 No. 40 EStG. [91] However, this arrangement is provided by § 15 Abs. 2 pp. 2 to 4 UmwStG.

The legislator is of the opinion that such a tax arrangement is to be affirmed in the event of a sale of the shares to an entity involved in the division, which constitute more than 20 per cent of the shares existing in the entity before the division takes effect, within a period of five years if the sale takes place to an outsider. A sale within the previous group of shareholders or within a group is therefore also within

the five-year period is harmless.

§ 15 para. 3 UmwStG states that § 11 Abs. 2 UmwStG is not applicable if the division creates the conditions for a sale. However, it can be assumed that each division creates these prerequisites, since this may create an independent operation that can be sold at any time. As a result, sentence three does not have its own scope under h.M., but must be examined only in conjunction with sentence 4 and would therefore not apply if the other requirements of sentence 4 were not met and, in particular, no sale took place. [92] However, the financial administration takes a different view.[93] The provisions of sentence 3 constitute an independent scope of application, which comes into effect if the 20 % limit of sentence 4 is not exceeded. In such cases, it must be examined whether the division created the conditions for a sale. [94] However, the author Ralf Neumann[95] disagrees. It considers that a sale within the five-year period only leads to a definitive exclusion from the book value and interim value approach, but this does not mean that there is an immediate possibility of a sale after that period. In his opinion, § 15 Abs. 3 UmwStG, whereby the regulation is again granted an independent scope of application. Consequently, even outside the blocking period, an abusive design would

to be checked, which may also lead to the exclusion of the book and intermediate value approach on the basis of sentence 3. However, when exactly the conditions for a sale that constitute the misuse are created are not explained in more detail. However, since a sale can occur after each division and the wording in the law is too inaccurate, it can be assumed that in such cases the tax administration is in the burden of proof. This was

refuted by the BFH now.[96] Accordingly, § 15 para. 3 UmwStG not to be regarded as an independent ground for exclusion. It merely constitutes the basis for the presumption of sentence 4.

The sale within a period of five years constitutes an irrefutable presumption, i.e. that a sale within this period is always presumed to be abusive. [97] From this typification it can be concluded that a sale after the blocking period does not give rise to a presumption of abuse. If an abusive arrangement is given, the tax assessments must be amended retroactively.

§ 18 UmwStG deals with the trade tax consequences of the transfer of assets from a corporation to a partnership or natural person (merger according to § 3 ff. UmwStG), the change of legal form of a corporation into a partnership (§ 9 UmwStG) and the transfer of assets of a corporation by division or separation (§ 16 UmwStG). Application cases are not covered by the standard. § 18 UmwStG as lex specialis takes precedence over § 7 GewStG. [] 98]

5.4.1.

In principle, the activity of a corporation according to § 2 para. 2 S. 1 GewStG in full as a commercial enterprise. The conversion would therefore also constitute a trade tax operation. The purpose of the provision is therefore to enable the continuation of the book value and the associated tax-neutral transfer, in which the discovery of the hidden reserves is ensured, also for trade tax purposes. [] 99

There is no limitation to domestic operations. The corresponding application to cross-border conversions results for the merger and division or separation from § 1 para. 1 S. 1 No. 1 UmwStG and for the change of form from § 1 Abs. 1 S. 1 No. 1 UmwStG, since thereafter the 2nd to 5th Part of the conversion tax law applies to corresponding conversion types or comparable foreign transactions.

However, the standard does not create a trade tax event, but refers only to § 3 UmwStG for the determination of the business income. This means that the conversions carried out under § 3 UmwStG are not subject to trade tax on the basis of the reference alone. Much more, the standard only applies if the transferring corporation also constitutes a taxable business within the meaning of the Trade Tax Act. This would not be the case, for example, with a registered association (e.V.), which itself has no economic business operation. [100] Since no independent regulations are made in § 18 UmwStG,

use the value shown in the transmission balance sheet pursuant to § 3 UmwStG also for business tax.[101] Thus, the conditions for the choice of approach (common value, book value or intermediate value) also apply to business tax.

§ 18 Abs. 2 UmwStG stipulates that the takeover profit remains tax-free. The aim of the regulation is to avoid double loading, since in the case of an approach of the common value, i.e. In the meantime, the discovery of the hidden reserves is already subject to business tax in the limited liability company and is therefore not taxable in the case of the partnership. [102]

5.4.2. Closure period

If the business of the partnership or natural person is sold within five years of the conversion, the transferee is subject to business tax. The same applies to the sale of a branch and co-contractor share acc. § 18 Abs. 3 p. 2 UmwStG. Relevant for the calculation of the deadline is the tax transfer date. This has the consequence that a sale or abandonment between the tax transfer date and the registration in the commercial register also has a

triggers transaction subject to trade tax.[103] The tax liability also extends to the business assets that already existed before the conversion and also to hidden reserves that were formed after the conversion, but not to economic goods that were acquired after the conversion.[104] However, a loss of disposal or abandonment is in accordance with § 18 para. 2 S. 1 UmwStG not to be considered. Furthermore, no consideration of the allowance acc. § 16 Abs. 4 EStG.[105] Unlike other abuse avoidance rules of the Conversion Tax Act, retroactive taxation does not have to be carried out, since the profit from the sale of the (partial) business or share of the company is subject to taxation. The date is accordingly the year of the sale.

Before the amendment of § 18 UmwStG, the condition for the violation of the blocking periods was that this only takes place in the case of a sale “without valid reason” (§ 18 in conjunction with § 25 para. 2 S. 1 UmwStG 1977. The reason for the sale is no longer relevant under the current version.[106] Intent to abuse also no longer has to exist.[107] This led to irrefutable typification. It should also be noted that the standard does not in principle presuppose that the book value or interim value approach was chosen at the time of conversion. Consequently,

the capital gain would be subject to business tax even if the conversion to the common value took place. However, in this regard, the opinion is consistently held in the literature that the trade tax retaxation acc. § 18 Abs. 3 UmwStG does not take place in such cases, since taxation does not correspond to the sense and purpose. [108]

5.4.2.1. Purpose of the blocking period

The liquidation of the corporation is in principle subject to trade tax, but not the cessation or disposal of a (partial) business of a partnership/sole proprietorship or a share of the company. The abuse prevention provision is thus intended to prevent the corporation being converted into a partnership or a sole proprietorship and only then being sold in order to circumvent the trade tax liability.[109] § 7 S. 2 GewStG also provides that a capital gain is subject to trade tax under certain conditions. The standard also serves as a misuse prevention provision with regard to the book value introduction according to § 6 Abs. 5 pages 3 EStG.[110] As a result, it could be considered that an additional abuse avoidance standard in the Conversion Tax Act is no longer necessary. However, it is

not to follow. Although the BFH[111] decided that the regulation of § 18 para 4 UmwStG a.F. (which corresponds to today's § 18 para 3 UmwStG) was subsidiary to § 7 para. 2 GewStG, on the other hand, in cases where both standards apply in principle and § 7 para. 1 S. 2 GewStG, on the basis of subsidiarity, applies, the prohibition of the trade tax crediting according to § 35 EStG, which

is regulated in § 18 UmwStG, still apply. This prevents a reduction in income tax.

5.4.2.2. Business tax infection

Since the tax liability also extends to the business assets that already existed before the conversion, it must be checked whether the provision still corresponds to the purpose of the standard and the conversion tax law. The author Prof. Dr. Rainer Wernsmann discussed this in an essay.[112] It argued that the legislator was of the opinion that if a sale took place within five years of the conversion of a limited company into a partnership or natural person, the conversion was solely for the purpose of not incurring any business tax liability. However, the business tax liability is circumvented only with regard to the transferred assets, since without a conversion the previously existing assets of the partnership/single company would not have caused a business tax liability in the event of a sale, and therefore a full taxation of the business assets would contradict the meaning and purpose. The

BFH had due to this contradiction within the norm in several judgments[113] regarding § 18 para. 4 UmwStG 1955, which was the pioneer of today's subsection 3, but at that time without the regulation of today's § 18 para. 1 HS UmwStG, ruled that the business tax liability concerns only the assets received by the conversion and not the entire business assets (teleological reduction). One reason for the teleological reduction was also that there was a contradiction with the meaning and purpose of the conversion tax law. This serves to ensure that meaningful corporate restructurings that serve to preserve the company should not fail due to tax hurdles. However, the extension of the business tax liability to the entire business assets would argue against precisely this, since this could avoid conversions. Contrary to this view, the JStG 2008 subsequently transferred § 18 para. 4 UmwStG 1955 to the third paragraph plus the second half-sentence of the first sentence, which stipulates that the business tax liability also concerns assets which were already present before the conversion. In his essay, the author deals in particular with the question of whether the regulation is consistent with the principle of equality of the art. 3 para 1 GG is compatible. Equality before the law means equal treatment and unequal treatment. The tax-free sale of the business of a partnership (insofar as natural persons are involved in it) and the taxable sale of the business of a limited company do not yet give rise to unequal treatment, since this regulation is governed by § 2 para. 2 p. 1 GewStG is justified. However, this should be assessed differently in comparison with the sale of two partnerships if one triggers business tax liability and the other does not. In principle, the avoidance of abuse can be used as a justification for unequal treatment, but the full taxation of property goes beyond this justification, since such taxation makes sense and

Purpose of abuse prevention exceeds. In summary, the author is of the opinion that the norm is against art. 3, par. 1 GG violates, since the taxation of the property takes place, which cannot be justified by the avoidance of abuse and consequently the partnership or natural person is not treated equally compared to others. The scheme would therefore be clear and unambiguous in the event of a merger of the limited liability company with its sole shareholder, which

previously did not own an independent business and forms a business only when the assets were taken over, since there was no property before the conversion, which could originally have been sold or abandoned free of trade tax. [114]

If the business sale or abandonment also includes assets that are located abroad, this is also subject to business tax as far as it does not belong to a permanent establishment. However, if assets belong to a foreign permanent establishment, it is exempt from taxation. [115]

§ 20 UmwStG regulates the transfer of a business, part-operation or co-entrepreneur's share in a corporation or a cooperative, in which the transferor receives new shares in the company. Like some other regulations, it also deals with the valuation of the transferred assets and enables the continuation of the book value, which leads to a success-neutral contribution. Before the SEStEG, the standard also regulated the exchange of shares. However, this was removed and the tax consequences were determined in an independent standard. [116]

5.5.1. Personal and factual scope

§ 1 para 3 and para. 4 UmwStG determine the factual and personal scope of application of the 6th to 8th Part of the Conversion Tax Act and thus also that of § 20 UmwStG. Since the submitter in § 20 para. 1 UmwStG is not regulated, in particular the determination of the personal scope of application in § 1 para. 4 UmwStG of importance. In principle, the contributor may be any natural or legal person governed by private and public law. This also applies to foreign companies incorporated under the rules of an EU member state or EEA state and whose registered office is located in one of these states.[117] In the case of a natural person, too, it is not relevant whether the natural person is subject to unlimited or limited taxation as long as Germany has the right to taxation in the event of a sale of the business (§ 1 para.). 4 p. 1 no. 1 lit. b UmwStG. However, if this is not the case, § 20 UmwStG can still apply if the natural person is resident in an EU/EEA country and does not have a residence in a third country according to a DTA. [118]

Acquiring legal entity may be any corporation or cooperative within the meaning of § 1 para. 1 No. 1 and 2 KStG. In principle, there is initially no regulation stating that the corporation must also be liable to corporate tax. Thus, an application can also be considered for exempt entities. However, the conditions of the book value, i.e. the interim value approach that these can only be chosen if the acquiring corporation is subject to corporate tax. It is irrelevant whether the acquiring corporation is formed only by contribution or already exists beforehand.[119] An application of the standard to an e.V. or VVaG as an assuming body is excluded.[120]

The requirements of the personal scope of application must be available at the latest on the tax transfer date. [121]

§ 1 Abs. 3 UmwStG contains a final list of cases of individual and universal succession, which covers § 20 UmwStG. These include, inter alia, mergers, spin-offs and changes of legal form. Whether the conditions for such cases are met depends on the conversion law alone at national level. However, the amendment of the Conversion Tax Act by the SEStEG can also cover foreign and cross-border conversions of § 20 UmwStG, as long as the conversion is comparable to a national conversion. [122]

5.5.2. Entry item

When a company in the sense of the standard is present, is not exactly determined in the conversion tax law. The decisive factor is that the operation is brought in as a whole. Overall, all functionally essential operating bases.[123] However, an actual transfer is important here, since the pure transfer of use is not sufficient. [124]

There is also no definition in the Conversion Tax Act for the partial operation. This can, however, both § 15 Abs. 1 S. 2 UmwStG and § 16 Abs. 1 point 1 EStG. The part of the holding shall comprise an independent part of the total holding which is also viable on its own. [125]

On the basis of the income tax requirements, it is to be assessed whether a share of the company is present. Co-entrepreneur shares within the meaning of § 15 para. 1 p. 1 no. 2 EStG, § 18 para. 4 § 15 Abs. 1 p. 1 no. 2 EStG and § 13 para. 5 EStG.[126]

The co-entrepreneur share includes not only the total hand assets but also the special assets. When assessing whether all the main operating bases are contributed, special operating assets must therefore also be included.

The operation, partial operation or co-contractor share must have been available at the transfer date. [127]

5.5.3. Granting of new shares

Another prerequisite for the existence of a transfer process within the meaning of § 20 UmwStG is the granting of new shares. The value of the shares received does not have to correspond to the value of the transferred holding, branch or co-contractor share. Therefore, any (even small) granting of new shares is sufficient.

5.5.4. Assessment

Paragraph 2 of the standard lays down the rules for the valuation of the transferred assets. In principle, an valuation must be carried out as in other conversion cases with the common value. However, upon request and on presentation of the prerequisite, a performance-neutral valuation with the book value or an intermediate value, but maximum with the common value, can be carried out. The value with which the assets are valued applies according to § 20 Abs. 3 S. 1 UmwStG for the contributor as

Sale price and for the acquiring company as acquisition costs.

In practice, whether a loss carry forward is present is often decisive for the decision of the valuation. Since a trade tax loss carry-forward according to § 10a GewStG is lost after the transfer, there is often an valuation with an intermediate value, which leads to the presentation being exhausted. For the acquiring company, this has no negative impact, since the interim value approach increases the tax base for the deduction for wear and tear and a later sale may also generate a lower profit. The same applies if there is a loss carry forward pursuant to § 10d EStG or if a KG is converted pursuant to § 15a Abs. 1 EStG is an accountable loss. [128]

5.5.5. Date of submission

The tax law provides in principle for the transfer date to the time of the transfer of economic property within the meaning of § 39 para. 2 AO and thus to the time of the actual transfer.[129] § 20 para. 5 and 6 of the UmwStG constitute independent regulations on tax retroactive effect, which can be taken into account on request. Paragraph 5 provides that, on request, the income and assets of the contributor and the acquiring company shall be determined as if the assets had been transferred at the end of the tax transfer date.

In the case of a contribution in kind by merger, division, separation and separation, the cut-off date may be the date on which the final balance sheet of each of the merging undertakings was drawn up. The date to be selected for each transferee company must be individual.[130] However, this date may be no more than eight months before registration in the commercial register. In all other cases, reference may be made to the tax reference date not more than eight months before the date of conclusion of the transfer agreement and not more than eight months before the business assets are transferred to the company. The date of the actual transfer is the date on which the economic ownership passes. As a rule, this time is after the submission contract.[131]

Significant is the transfer date for the taxation of the transferred business, since the profit is subject to corporate tax from that date. Furthermore, the time is decisive for the allocation of the shares and for the profit realization, if a contribution has not been made with the book value.[132] According to § 25 Abs. 1 UmwStG § 20 UmwStG also applies to the change of form and therefore also paragraphs 5 and 6.

5.5.6. Abuse prevention

In order to avoid an abusive design, § 20 para. 6 S. 4 UmwStG a reference to the provisions of § 2 Abs. 3 to 5 UmwStG. As in § 2 UmwStG, the provision is decisive in order to avoid a possible tax loss due to cross-border conversions. With regard to the content of the regulation, reference is made to the implementation of § 2 UmwStG. The abuse prevention of § 20 UmwStG thus represents the second and thus also the last abuse prevention without the application of the blocking periods.

A significant change made by SEStEG was the transition from the contribution-born shares to the blocked shares. Section 22 of the UmwStG contains a regulation regarding the taxation of the shareholder who was a contributor under Section 20 of the UmwStG or under Section 21 of the UmwStG. In principle, §§ 20 and 21 of the UmwStG already provided for the immediate taxation of the shareholder. § 22 UmwStG therefore refers only to a subsequent taxation to be carried out.[133]

5.6.1. Development of the standard

Before the amendment of the UmwStG by SEStEG, a contribution below the common value resulted in so-called so-called “recitals”. contribution-born shares within the meaning of § 21 UmwStG a.F., which were subject to a temporary special regulation. This special arrangement meant that the shares were always liable for tax, even if the conditions of § 17 EStG were not met. The SEStEG resulted in the abolition of these contribution-borne shares and the associated special arrangements, but at the same time § 17 EStG was also supplemented by paragraph 6, which states that shares acquired on the basis of a contribution in kind below the common value always qualify as shares within the meaning of § 17 para. 1 EStG apply.[134] However, the shares created up to SEStEG retain their position as contribution-born shares.[135] The introduction of the paragraph should be §§ 22, 26 para. 2 pages 1 and 2 UmwStG 1995, § 3 No 40 pages 3 and 4 EStG a.F. and § 8b para. 2 KStG a.F. replace.[136] A last change to the standard was made by the Brexit StBG, as the withdrawal of the United Kingdom from the European Union led to the contributor’s having to comply with the requirements of § 1 para. 4 UmwStG were no longer fulfilled and this was a substitute realization according to m. § 22 para 1 p. 6 no. 6 UmwStG. In order to prevent retroactive taxation due to this, paragraph 8 was introduced, which considers this situation to be harmless, and this applies accordingly only to contributions made before the EU exit.[137]

5.6.2. Conditions of sale

A sale means a transfer of legal or economic ownership in return for payment, and therefore does not include a transfer free of charge to an acquirer who is not a corporation or cooperative. It is also irrelevant whether the sale took place voluntarily and involuntarily (for example in the case of foreclosure or the like). In the case of a free transfer, the acquirer assumes the legal status of the seller, i.e. the period is continued with him.[139] § 22 (1) S. 6 UmwStG lists further events which are equivalent to a sale. According to the tax administration and the BFH[140], § 22 Abs. 1 S. 6 UmwStG no conclusive list of substitutes. Accordingly, conversion operations, in particular (forward) mergers, are also equated with the sale, although no provision is made for this purpose in the law. [141]

5.6.3. Problematics of substitute events

By § 22 para. 6 UmwStG, operations which do not constitute a sale are treated as such. However, these points must be considered more closely from the point of view of over-taxation, since they lead to full taxation of the transfer profit, irrespective of whether the substitute event brings a material advantage to the shareholder. This would be, for example, in the case of a liquidation of

Company subject to blocking period or also given in the event of a conversion. In particular, objections are raised in the literature against the further transfer of the received shares in the context of a merger or division, which are described in § 22 para. 1 p. 6 no. 2 UmwStG. [142] However, the legislator sees an exception according to § 22 Abs. 1 p. 6 No. 2 2. HS, 4 2. HS and 5 2. HS UmwStG in the transfer of the blocked-term shares at book values according to § 20 and § 21 UmwStG. These

Conversions therefore do not trigger taxation of profits. However, this does not apply to the other types of conversion, such as merger.

The tax consultant Prof. Dr. Wolfgang Kessler[143] is of the opinion that, in particular, the reputation of conversions as a substitute can often not be associated with the sense and purpose of avoiding abuse. For conversions to book value, it is irrelevant whether or not a contribution was previously made below the common value. The legal consequence of such cases is merely that the acquirer enters into the legal status of the predecessor. On the basis of the book value approach, no beneficiary divestment would take place. This would be different from the approach of an intermediate value or the common value, since this is followed by a favourable treatment. Since the shareholder conversion at book value does not confer a tax advantage, it does not, in its view, constitute a substitute. This line of thought was also adopted in the conversion tax waiver.[144] According to that provision, there is no retroactive taxation of the transfer at book value on equity grounds if the following conditions are met:

1. The non-application of § 22 para 1 and 2 UmwStG was requested by all interested parties,

2. no status improvement may occur with regard to the blocked-term shares. This means that there is no impediment to the taxation of the profit I or of the profit I. II may be achieved,

3. the hidden reserves of the blocking-period-arrested shares may not be transferred to a third party,

4. the German tax law may not be restricted or excluded and

5. the applicants must agree that all direct and indirect shares in a company participating in the conversion § 22 para. 1 sentence 6 and § 22 para. 2 sentence 6 UmwStG is to be applied accordingly.

Kessler states in his essay that the prerequisites are sometimes difficult to implement in practice. This already begins with the first condition, since the absence of the application of a shareholder leads to failure and thereby minority shareholders would receive too much power beyond the minority protection rules of the UmwG (§ 207 para 1 s.1 umwG).

However, the conversion tax waiver points out that these are not general conditions which exempt taxation of the transfer profit. On the basis of this, a full examination of the individual case has to be carried out, which then leads to no taxation if it is in all respects with the exceptions of § 22 para. 1 p. 6 no. 2, 4 and 5 UmwStG agrees.[145] Furthermore, the use of the equity regime under the conversion tax waiver is also made conditional on whether the conversion serves the sale of the transferred assets or not. This can be assumed if the contributor is no longer directly or indirectly involved in the transferred assets. [146]

5.6.4. Profit to be recovered

The law distinguishes between the transfer profit I and the transfer profit II. In the case of a contribution in kind below the common value according to § 20 Abs. 2 S. 2 UmwStG and the subsequent sale of the received shares within a period of seven years is the profit from the contribution according to § 20 para. 1 S. 1 UmwStG as profit I to be taxed retroactively. Was made within the framework of a contribution in kind according to § 20 para. 1 UmwStG or an exchange of shares according to § 21 Abs. 1 UmwStG a transfer of shares below the common value and if these shares are sold by the acquiring company within a period of seven years, the transfer acc. § 20 Abs. 2 S. 1 UmwStG, insofar as it does not comply with § 8b para. 2 KStG would have been tax-free if

Profit II to be taxed retroactively. The contribution profit I is thus triggered by the contributor, while the contribution profit II is triggered by action by the acquiring company.[147]

However, a divestment within seven years does not necessarily lead to a full discovery of hidden reserves. Much more, the contribution profit is reduced by 1/7 for each time year past since the contribution. Both the transfer profit I and the transfer profit II trigger a business tax liability only if the transfer at the common value also acc. Section 7

S. 2 GewStG would have been subject to trade tax.[148]

5.6.4.1. Profit I

The regulation applies only if contributions in kind according to § 20 para. 1 UmwStG as amended by the SEStEG. For previous submission cases, the provisions of § 3 No. 40 S. 3 and 4 EStG and § 8b para. 4 KStG.[149] Should the contribution have been made at a value below the common value, although the requirements of § 20 para. 1 UmwStG were not fulfilled and the notices can no longer be changed, no retroactive transfer profit acc. § 22 UmwStG, since there is no case of § 20 UmwStG, even if the contribution was treated as such.[150] The requirement of a contribution in kind below the common value also leads to a request from the company at the time of the transfer. Thus, a retroactive transfer profit under § 22 UmwStG can also arise if the book values corresponded to the common values during the transfer period. Often, an application is also advantageous in such cases, as it leads to a hedge, should take place an audit by the tax office and determine other values. [151]

The legislature is of the opinion that tax-advantaged contributions could be used to circumvent the tax assessment, since a contribution at book value does not imply a taxable profit and the subsequent disposal of the received shares constitutes an operation favourable under § 3 no. 40c of the EStG. Accordingly, the legal consequence of § 22 UmwStG occurs if the assets transferred were valued below the common value (book value or intermediate value) and the shareholder sells his received shares within a period of seven years. If these conditions are met, a retroactive taxation of the contribution by the submitter takes place. The shareholder is the so-called “locked-term shares”. As a result, the contributor has § 22 Abs. 3 UmwStG to provide proof annually for seven years that the shares are still attributable to it.

5.6.4.2. Profitability II

Subsequent taxation of the shares transferred to the company at book value is to be carried out, because the legislature wants to prevent a not in accordance with § 8b para. 2 KStG contributes shares in a corporation below the common value and these then by the company according to § 8b para. 2 KStG can be sold tax-free. Here again, no contribution profit is taxable if the contribution acc. § 20 or § 21 UmwStG was erroneously made.[153]

For transfers before 12.12.2006, the old law is still applicable. Therefore, in the case of a transfer or exchange of shares before 12.12.2006, a later sale acc. § 8b para 4 no. 1 KStG a.F., since therefore § 8b para. 2 KStG does not apply if the shares are contribution-born shares in accordance with § 21 UmwStG.[154]

A retroactively taxable transfer profit II does not occur in accordance with § 22 para 2 p. 5 UmwStG[155] insofar as the transferor has already sold all or part of the received shares.

§ 24 UmwStG, which is established in 7. Part of the conversion tax law, includes the tax treatment of a transfer from a business, a branch business or a co-contractor share to a partnership in which the contributor becomes a co-contractor or increases his already existing co-contractor share.

5.7.1. Consignor

By whom exactly the submission should take place, is not regulated in § 24 UmwStG. Domestic and foreign natural persons, partnerships and limited and unlimited taxable companies in so far as they have business assets are therefore eligible. In the case of co-entrepreneurship, however, both the co-entrepreneurship as such can be contributors and the individual co-entrepreneurs. According to the financial administration, the co-entrepreneurship is to be regarded as a contributor if it continues to exist as such.

and also the shares in the partnership are granted to it. However, if the co-entrepreneurship does not continue and the shares are granted to each individual shareholder, the contributors are the individual co-entrepreneurs. [156]

5.7.2. Operation

The enterprise includes not only that of the commercial enterprise, but also agricultural and forestry enterprises and assets, which belong to the independent activity according to § 18 EStG. The standard is not only limited to domestic processes, but also covers international issues.[158] A 100 % shareholding in a limited liability company also constitutes a part-operation within the meaning of Section 24 of the UmwStG if it is in the business assets (both arbitrary and necessary) of the transferor. However, this arrangement is different from the submission

into a corporation not regulated by law. The treatment of the 100 % shareholding from the operating assets as a part of the enterprise is described in § 16 para. 1 No. 1 p. 2 EStG. A prerequisite for the existence of a part of the holding is that it is fully in the operating assets. A partial contribution from private assets is excluded despite the existence of a 100 % shareholding. However, since a minimum holding period does not result from § 24 UmwStG, a contribution to the operating assets can be made shortly before the transfer.[159]

5.7.3. Partner company

The term partnership includes all co-entrepreneurships. These include not only open commercial companies, limited partnerships and the like, but also silent partnerships. There is also the possibility that the partnership will only be founded by the admission, a previous existence is therefore not necessary. However, the asset management partnership is excluded.[160]

5.7.4. The introduction process

An exact definition is offered neither by civil law nor by tax law. Contribution is understood to mean the legal or economic transfer of ownership of assets which are in the (special) business assets into the (special) business assets of a partnership. In return, the company is admitted to the company or an increase in the existing company shares. The introduction thus represents an exchange-like process. Thus, there is a sale transaction for the contributor and an acquisition transaction for the partnership. A divestment transaction exists regardless of the choice of the valuation approach. This only determines whether the sale generates a profit. [161] An important aspect of § 24 of the UmwStG, which distinguishes the scheme from the rest, is the fact that not all essential operating bases have to be transferred to the acquiring partnership in order for the regulations to apply. The transfer means only the transfer to the joint entrepreneurial assets. Consequently, the mere transfer of use is sufficient, since it provides the conditions for the identification in the special business assets, which also belongs to the business assets of the receiving company. [162]

5.7.5. Assessment

§ 24 UmwStG regulates in particular the valuation of the transferred assets and the resulting tax effects on the transferor and on the partnership. The structure of the standard is similar to that of §§ 20 to 23 UmwStG, which regulate the transfer of material groups into a corporation. Unlike the 2nd to 5. Part of the conversion tax law is introduced in the 7th and also in the 6. Part not linked to the conversions from the conversion law. Much more is created an independent regulatory area, which is defined exclusively by tax law. [163]

For the recognition of business assets in the receiving partnership, paragraph 2 offers three options: common value, intermediate value or book value. In doing so, the partnership exercises the right to choose and submits the corresponding application in a valuation according to the book or intermediate value.

Profit distributions of partnerships are usually based on the capital account of the respective shareholder. If the assets are recognised after the transfer at a value lower than the common value, an injustice arises for the transferor, since his capital account also corresponds to this value, even though he has contributed other hidden reserves. As a result, the supplementary balance sheets are offset. A certain method cannot be derived from § 24 Abs. 2 UmwStG. This gives rise to two possibilities. On the one hand, an approach to the common value can be made in the overall hand balance (net method). The hidden reserves discovered are compensated by the formation of a negative supplementary balance for the contributor. From the overall balance sheet, the actual circumstances of the company can therefore be taken. On the other hand, it is possible to show the book values in the total manual balance sheet (gross method), whereby, if necessary, positive supplementary balance sheets of the remaining shareholders have to be prepared.

5.7.6. The blocking period

§ 24 Abs. 5 UmwStG represents a misuse prevention regulation. In order for it to apply, the following criteria must be met:

1. contribution below the common value and

2. the items of contribution included an interest in a corporation, association of persons or property; and

3. there was a sale by the receiving partnership within seven years or a transfer acc. § 22 (1) sentence 6 no. 1 to 5 and

4. the profit on the contributor at the contributor period not according to § 8b para. 2 KStG would have been exempt from tax and

5. the profit from the sale is attributable to a co-contractor for whom § 8b (2) KStG applies.

If all criteria are met, this leads to the corresponding application of § 22 (2), (3) and (5) to (7) UmwStG. This provision stipulates that the profit from the transfer is to be taxed retroactively in the marketing year of the transfer. However, an application of the allowance pursuant to § 16 para 4 EStG and the tariff advantage pursuant to § 34 EStG are no longer considered. For the purpose of calculating the transfer profit II referred to in the Act, the value of the shares received is to be deducted from the common value of the shares transferred at the time of the transfer after deduction of the transfer costs. The resulting value shall be reduced by one-seventh for each year elapsed since the submission process. The contribution profit II is considered to be an ex-post cost of the shares received.

Although the sale means the transfer of economic ownership in return for payment, the cessation of the partnership also leads to the realisation of the facts.[164] It is not clear whether the transfer at book value to another partnership also leads to a breach of the blocking period, since the transfer against the granting of shareholder rights also constitutes an operation equivalent to the sale. Because only a profit according to § 24 Abs. 5 and this is not present, the regulation does not apply.[165] § 24 para. 5 UmwStG also refers to the regulation of § 22 Abs. 3 UmwStG. The

The transferor must therefore provide proof that no sale of the shares took place within the following seven years after the transfer. If no proof is provided, this would be considered as a sale and the facts would be fulfilled. It is questionable whether this substitute factual reality also applies in the case of § 24 UmwStG, since a corresponding application of the regulation only the legal consequence of § 24 para. 5 and thus only leads to a blocking period violation if there is a sale. On this basis, the literature[166] takes the view that the breach of the obligation to prove does not lead to a taxable profit.

The blocking period starts from the tax transfer date and is to be calculated day accurately. [167]

According to Fuhrmann, the regulation is only of minor importance in practice. In the case of a sale of shares that were previously deposited at book value, the capital gain on the basis of the supplementary balance sheets to be prepared is usually entirely attributable to the contributor.[168] This is clear from the following example:[169]

A-GmbH, B-GmbH and natural person C establish ABC-OHG, in which all shareholders shall each have a 1/3 stake. While the two GmbHs make a cash contribution of € 150,000 each, C contributes its operating assets in X-AG at book value (book value 90,000, –€, common value 150,000, –€). The total hand balance thus results in a capital of € 130,000 for each shareholder and in the supplementary balance sheets for A-GmbH.

and B-GmbH each have a positive capital of 20,000, -€ and for C a negative capital of 40,000, -€. If a sale of the shares takes place for 150,000, -€, it comes to the following invoice:

Figure 1: Calculation of the profit to be distributed

Source: Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 24, paragraph 1486

As can be seen from the calculation, in the event of a sale, the profit is completely attributable to C, which as a natural person § 8b para. 2 KStG may not apply. For a breach of the blocking period, it therefore fails because of the last factual characteristic. If one of the two GmbHs had contributed the shares at book value, the facts of § 24 para. 5 UmwStG also not fulfilled because for the GmbH § 8 Abs. 2 KStG is applied.

However, if there is an increase in the value of the shares in the sale, in the above example there is a sale proceeds for A-GmbH and also for B-GmbH, since the shares in the profit then amount to more than € 20,000. However, even in this case, no retroactively taxable profit II arises. The transfer profit II according to § 22 Abs. 2 UmwStG covers only the hidden reserves available at the time of transfer.[170] By § 24 para. 5 UmwStG a restriction of taxation takes place, since this only takes place insofar as the profit share is attributable to a co-contractor, for which § 8b (2) KStG applies. However, since it is not the hidden reserves that were present at the time of the transfer that are attributable to the profit share of the GmbHs, but only the hidden reserves that have arisen during ongoing operation, there is no retroactive taxation.[171] A different view would also not be compatible with the purpose of the abuse prevention standard. The intention of the scheme is to prevent a tax-neutral transfer for the purpose of a subsequent tax-advantaged sale. If you change the example and C puts the shares at the common value, it creates a taxable capital gain. In the event of a sale of the shares, after an increase in value, the GmbHs are entitled to the benefit of § 8b para. 2 KStG for the hidden reserves created during ongoing operation. Subsequent taxation of these hidden reserves after a transfer at book value cannot therefore be justified for the purpose of the standard. [172]

The following blocking periods can be taken from the abuse prevention provisions of the Conversion Tax Act:

Table 1: Overview of blocking periods

Source: own presentation

The blocking periods show both similarities and differences. In all regulations, the effects of the blocking periods are triggered by a cessation or sale operation. The legal wording shows that if a further sale or abandonment takes place within the respective blocking period after a conversion, there is an abusive arrangement. These regulations restrict entrepreneurial flexibility with regard to possible subsequent restructuring.[173] Furthermore, the abuse prevention norms are

Typical abuse regulations. Apart from § 6 UmwStG, the intention to abuse does not constitute a precondition in any provision. The legislature thus makes irrefutable assumptions, which is why the taxpayer cannot provide any proof to the contrary. Therefore, for the corresponding legal consequence to occur, the intention is irrelevant. As a result, the misuse avoidance provisions of the conversion tax law differ from the blocking period regulation.

general misuse prevention provision of § 42 AO, since the taxpayer is entitled to provide a counter-proof.

However, while the annual partial reduction of the transfer profit pursuant to §§ 22 and 24 of the UmwStG makes it clear that the presumption of abuse in the circumstances decreases the further away the sale is from the conversion process, § 18 of the UmwStG provides for full taxation that goes beyond the assets received through the conversion. Also in the remaining regulations, a full taxation of the profits is retroactively carried out. It should be noted that § 18 UmwStG is the only provision that does not make retroactive taxation, but that the tax liability is present in the year of the sale.

The blocking period regulations and the associated irrefutable presumption, however, not only have a negative impact on the taxable person through ex-post taxation. The blocking periods offer much more legal certainty. As can be seen from the observations on § 42 AO, the decision on when an abusive arrangement exists cannot always be clearly made. However, through the blocking period scheme, the taxpayer knows that a sale within the period leads to a corresponding tax result. A case-related decision, which may also depend on the argumentation of the tax consultant or the judge and thus possibly lead to unjustified advantages, is avoided.

The treatment of cross-border reorganisations of different Member States is carried out following some amendments by the provisions of Council Directive 2009/133/EC of 19.10.2009 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares involving companies of different Member States and the transfer of the registered office of a European company or a European cooperative society from one Member State to another (Merger Directive). It can therefore be seen that the scope of the conversion tax law corresponds to that of the Merger Directive.

As early as 1970, the first draft of the Merger Directive was submitted by the European Commission.[174] Before this, only double taxation agreements existed between the Member States. However, the original versions of the Company Directive of 13.12.1977, 09.10.1978 and 17.12.1982 did not oblige the member states to adopt the requirements for cross-border conversions.[175] This commitment was made only by Art. 12, par. 1 of FRL of 23.07.1990.[176] The Third Company Directive of 1978 initially dealt only with domestic mergers. This was followed by individual amendments and additions, in particular with regard to the scope of entitlements.[177] After the proposal of 14 December 1984 for the Tenth Company Directive, which was intended to regulate the cross-border merger of public limited liability companies, effective implementation only took place with the Regulation on the European Company Code.

Statute of the European Company (SE) of 08.10.2001, which made cross-border merger possible for the first time. The SE is a European limited liability company which is a form of company managed at European level. Following a further proposal of 18 November 2003, the scope of application was extended to all limited liability companies on 11 May 2005.[178] Further amendments have led to the adoption of Directive 2009/133/EC of 19.10.2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares in companies of different Member States and to the transfer of the registered office of a European company or European cooperative society from one Member State to another Member State as a substitute for the original Directive, which is a codified version.[179] On 01.01.2020, the Directive on cross-border conversions, mergers and divisions (Conversion Directive) entered into force, the transposition of which the Member States have until 31.01.2023. [180]

The aim of the Merger Directive is to create conditions similar to the internal market for restructuring within the European Community and, in particular, to eliminate tax burdens in order to make European companies more competitive.[181] This covers cases involving two or more companies from different Member States. However, taxation is not completely waived, but only a tax deferral is granted by taxation only when an actual sale of the assets or business takes place.[182] The Merger Directive states that such arrangements are necessary for the creation of an internal market-like relationship in the Community, thereby ensuring the functioning of such an internal market.[183] Like conversion tax law, the Merger Directive is intended to enable tax-neutral conversions in order to promote the preservation of companies, since cross-border conversion serves to adapt to the requirements of the internal market.[184]

The purpose of the Directive is also clear from the fact that the conditions of the Merger Directive for a tax-neutral cross-border conversion do not allow individual Member States any room for interpretation. The will of the Community legislature is not to give the individual Member States the opportunity to attach further individual conditions to the tax-neutral conversion, but only to go according to the wording of the directive. A different view would also be contrary to the purpose of the Directive, since it would

Member States would be allowed to draw up their own rules, which could lead to distortions of competition. This also applies if, in the opinion of the Member States, loopholes in the directive are to be closed by their own regulations. [185]

As EU law, the Merger Directive takes precedence over the rules of the double taxation treaties, which are transposed into national law. The directive comes according to m. Article 3 of the FRL applies only if the company has a form listed in Part A of Annex I to the Directive which, in Germany, is, for example, the AG, KGaA, GmbH, etc. would be (i.e. not the partnership) established in a Member State and subject to a tax with no option as set out in Annex I, Part B (in

Germany is subject to corporation tax.[187] The partnership which opts for corporation tax under § 1a KStG is therefore not included, as this represents a choice. In accordance with Article 1 FRL, the regulations apply to the following operations: merger, division, transfer of assets, exchange of shares and the transfer of the registered office of an SE or SCE.

What exactly is understood by the individual processes results from art. FRL 2 Merger means the transfer of all assets of one or more companies to an existing or newly founded company against the granting of shareholder shares and, if applicable, a co-payment of max. 10 % of the nominal value of the shares. The division is the transfer of all assets and liabilities to one or more existing or newly formed companies against:

Granting of shares and, if applicable, a co-payment of max. 10 % of the nominal value of the shares. Separation means the transfer of one or more branches to one or more existing or newly established companies against the granting of shares and, if applicable, a co-payment of max. 10 % of the nominal capital of the shares. The transfer of assets is the transfer of the entire business or one or more branches of business into a company against the granting of shares. The exchange of shares concerns the obtaining of a majority of the voting rights in a company against the granting of shares in the acquiring company. The description of the conversion operations in Article 2 FRL is almost the same as that of the conversion tax law. Differences, however, lie in particular in the co-payment, since these are in the conversion tax law max. 25 % or max. 500,000, -€ may be. Furthermore, the conversion tax law presupposes that new shares must be granted for a tax-neutral contribution in kind or a tax-neutral exchange of shares. However, the requirement for new shares does not emerge from the directive. As a reason for the additional requirement, it is explained in the literature that the notarization and commercial registration of the capital increase clearly document the time and the object of the contribution. This is particularly relevant for cross-border operations. Since the problem of documentation could also be solved by proof obligations, it seems questionable whether a tax-neutral restructuring can be failed in this context alone. [189]

Directives in general do not constitute laws, which is why they must be transposed into the national law of the states addressed by the corresponding directive, in accordance with Art. 249 EC Treaty. Implementation is an obligation. As a result, this also applies to the Merger Directive. In principle, the way in which it is implemented is left to the individual states. These must only reach the given goal.[190]

Initially, the provisions of conversion tax law only applied to domestic transactions.[191] This contradicted both the freedom of establishment acc. Article 49 et seq. of the Treaty on the Functioning of the European Union, since it prohibits linking the movement of an EU citizen to another Member State with tax consequences, as well as the free movement of capital under Article 63 et seq. of the Treaty in the internal market. However, it was then mainly only extended to EU and EEA countries. Third countries were therefore excluded.

This does not violate the freedom of establishment, which is preferential over the freedom of movement of capital, since it is not applicable to third-country companies. In the case of Sevic, which concerned the merger of a Dutch company into a German company, but which was rejected by the Commercial Register because at that time conversion tax law did not provide for cross-border mergers, the German and German companies were given the reasons for the merger.

Dutch government for the different treatment of domestic and cross-border conversions listed that this is necessary to protect the interests of creditors, minority shareholders and employees.[194] The ECJ commented on this and explained that such a measure is only permissible if it does not go beyond what is necessary to achieve the objective.[195] However, this would be the case with such a general regime, since it involves mergers which do not threaten the aforementioned interests.

First of all, the Tax Amendment Act 1992 extended § 20 para. 6 and 8 UmwStG, in order to prevent the transfer of shares in one corporation to another corporation within the European Union.[196] As a result, the adoption of the extension of the Merger Directive in 2005 made it clear that a change in conversion tax legislation was necessary. [197] An adjustment of the conversion tax law was therefore again made by the SEStEG.[198] The purpose of the amendment to the conversion tax law was therefore to adapt to the Merger Directive, but in particular to enable cross-border mergers.[199] With effect from 13 December 2006, the scope was subsequently extended to the internal market.[200] The extension of the scope of application subsequently led to an increase in international conversions,[201] which shows that the tax burden prevented companies from restructuring.

Due to the adaptation of the conversion tax law to the provisions of the Merger Directive, both the transferring and the acquiring company can be an EU-foreign capital company under § 23 UmwStG. With regard to the conditions for a conversion that is neutral in terms of performance, conversion tax law complies with the Directive. The merger and share exchange were also extended to EU/EEA companies.[202]

The legislator considers that the last amendment took into account all the requirements of the Directive and that the objective of the Directive was also fully transposed into national law.[203]

In Art. 15 FRL is a regulation for the prevention of abuse. So they're kind of like this. FRL 4 to 14 shall not be applied if the principal motive is tax evasion or avoidance. This can be assumed if there are no economic reasons for the restructuring. The general wording of Art. 15 para 1 lit. a FRL requires each individual case to check whether the

Abuse intention was given from the beginning. Since a tax-neutral restructuring constitutes a safeguard for the fundamental freedom, it can only be affected in exceptional cases, e.g. only if there is an actual abuse. [204] The examination of the abusive design is similar to that of § 42 AO. As already explained, an overall case analysis also takes place there. However, since there is usually no clear fact and the intention to abuse is an internal fact, an assessment according to § 42 AO as well as art. 15 FRL complicated.

7.5.1. Assessment of the blocking period in the light of the Merger Directive

The Merger Directive differs from conversion tax law because conversion tax law usually does not have to have an intention to abuse if a sale or abandonment takes place within the blocking period. The blocking period cannot therefore be inferred from the Directive. [205]

7.5.1.1. Case Leur-Bloem

It can be inferred from the ECJ judgment of 17.07.1997[206] in the Leur-Bloem case that an assessment of abusiveness within the meaning of Art. 15 FRL (or in the judgment of Article 11a.F.) cannot be made on the basis of general criteria, but must be examined on a case-by-case basis. [207] The assessment of an abusive arrangement on the basis of uniform criteria is disproportionate. In addition, it is noted in particular that a merger aimed at creating a certain structure for a limited time can also take place for economic reasons.[208] It can therefore be inferred from the judgment that a presumption of abuse cannot come about solely because of the violation of a blocking period, irrespective of whether an actual intention exists. Rather, all the circumstances of the individual case must be examined without taking into account blocking periods as general regulations. The ECJ also states that the purpose of the Merger Directive to create competition-neutral tax regimes must not be affected by restrictions on individual member states.[209] As the last change of type. 15 FRL in 1990, the statements of the ECJ in this regard are still relevant.[210] The ECJ also follows these observations by judgment of 10.11.2011 (C-126/10).

According to Graw, the examination of each individual case is almost impossible in practice.[211] Due to the large number of individual cases in the field of tax law, the personnel situation in the financial administrations of the member states could not allow a precise investigation of all cases. The tax assessment procedure is a mass procedure which depends on such simplification and typification schemes. However, the utilization of the financial administrations is not sufficient as a justification for typed abuse schemes, which also include cases that are not subject to abuse ideas. In order for an intervention or the means to be proportionate with respect to the purpose thus achieved, the purpose and the means must be legitimate, appropriate and necessary. In order to assess whether irrefutable typifications are necessary, all alternative methods must first be considered. The ECJ[212] considers that typed

Abuse regulations are not necessary. However, this is questionable. If one compares the typing method with the full investigation, one finds that the full investigation leads to the correct result in individual cases, but the financial administration is not able to check every cross-border conversion in intensity, which leads to the fact that often from

temporal reasons no abuse would be detected. The necessity alone, however, is not a reason for or against the blocking period regulation. Rather, as can be inferred from the explanations of the ECJ[213], the adequacy is decisive. Since the background of the Merger Directive is the freedom of establishment under Articles 43 and 48 EC and thus exists in favour of the fundamental freedoms, an interference with those freedoms is not justified solely on the basis of holding periods. Administrative economics is no justification for this. The ECJ should therefore be approved.

7.5.1.2 Compatibility of primary law and national law

Regarding In the examination of the compatibility of national regulations and primary law, the ECJ stated in its judgment of 8 March 2017, referring to the judgment of 12 November 2015, that an assessment is not made with regard to primary law, but with regard to the final harmonisation measure.[214] Consequently, a review of national law can only take place if the regulations in this area have been finally harmonised at the level of the European Union. In the case of the abuse prevention provision of Art. 15 FRL (or Art. 11 a.F.), a corresponding final harmonization does not exist on the basis of the wording, which is why it is left to the Member States to assess when an abusive arrangement exists, while respecting proportionality. The Directive only allows Member States to refuse to apply the rules in the case of tax avoidance and tax evasion.

if the merger is not based on reasonable economic reasons.[215] The Directive does not contain precise provisions on how to identify the abuse. Thus, the Member States are empowered to adopt independent anti-abuse rules in accordance with proportionality. However, the ECJ has ruled that this authorisation does not apply to type-approving abuse provisions, as they violate the requirements of the Directive.[216] However, since the blocking period regulation makes an intention to abuse insignificant, German law makes it possible to affirm the abuse of design even if there are economic reasons in favor of restructuring, even though the regulation of the art. 15 para 1 lit. a FRL states that this is given only with an actual intention. It is therefore questionable to what extent the Member States are empowered to make an assessment and whether the blocking period regulation is compatible with the Merger Directive.

7.5.1.3. Final assessment of the compliance of the blocking period schemes

The irrefutable presumption seems disproportionate, since tax avoidance is in any case present, although the ECJ explained in its Leur-Bloem judgment that a full analysis of the restructuring has to be made for the assessment. The fact that the taxpayer is deprived of the opportunity to prove otherwise is thus in breach of the Merger Directive.[217]

From Art. 1 FRL it follows that this and consequently also art. 15 are applicable only where there is a cross-border conversion and it could therefore be concluded that the blocking period for national conduct does not infringe the Directive, since those situations do not fall within the direct scope of the Directive. In principle, the ECJ is responsible for interpreting Community law. However, since conversion tax law did not differentiate between domestic and cross-border conversions, but adopted the provisions of the Directive in a uniform manner, the ECJ also has jurisdiction with regard to domestic rules. Due to such case constellations, the so-called Dzodzi jurisprudence developed, which regulates the admissibility of referral questions, which in principle concern domestic law. Accordingly, a referral question which does not fall within the immediate scope of the Directive is not inadmissible for this reason alone.[219] Thus, the Merger Directive also applies to domestic transactions.[220] The uniform regulation of such situations is a common practice, since it does not disadvantage nationals and prevents distortions of competition.[221]

When establishing the abuse criteria, legislators must observe the principle of proportionality. Although the blocking periods are suitable for detecting abuses, they go beyond the goal by also including cases that are not caused by tax evasion or fraud. Tax avoidance ideas are motivated and thus the adequacy can no longer be affirmed. In order to fulfil this aspect as well, it would be sufficient to give the taxable person the opportunity to provide counter-evidence. Even if the blocking period initially continues to be a general presumption that also includes situations without intent to abuse, a rebuttable typification would constitute a less serious intervention.[222] In the ECJ judgment on the case of Cadbury Schweppes (which did not concern the Merger Directive, but the additional taxation) general abuse prevention norms are put forward as follows:

‘In order to establish the existence of such an [abusive] arrangement, it is necessary, in addition to a subjective element consisting in the pursuit of a tax advantage, that it should be established on objective grounds that, despite formal compliance with the conditions laid down by Community law, the objective pursued by the freedom of establishment, as set out in paragraphs 54 and 55 of the present judgment, has not been achieved’[223]

It can be inferred from the judgment of the ECJ that typifications for establishing abusive arrangements on the basis of objective facts are in principle possible. From this, authors such as Widmann[224] interpret that the blocking period regulation is compatible with the requirements of the EU. Although this judgment, contrary to the Leur-Bloem judgment, does indeed declare typifications admissible, it should be noted that the ECJ is additionally required in the same judgment to enable the production of counter-evidence.[225] However, since this is not given by the blocking period regulation, the regulations are still not compatible with EU requirements.

The explanatory memorandum to the government draft of the SEStEG[226] of 11.8.2006 provides the following explanation of the blocking period regulation of § 22 UmwStG:

‘Since the presumption of abuse within the meaning of Article 11 para. 1(a) FRL [a.F.] decreases as the distance from the time of the transfer increases, the hidden reserves to be taxed ex post are reduced by one-seventh a year in a linear manner. The longer the blocking period runs, the less likely it is that the initial transfer process should basically only serve to prepare for a subsequent sale. This also makes the conformity of the subsequent

Taxation of hidden reserves with Article 11 para. 1 FRL [a.F.] produced.

The introduction of the decreasing idea of abuse of § 22 UmwStG was thus based on the provisions of Art. 15 para 1 FRL (or Article 11 para 1 FRL a.F.). However, this is still a blanket abuse assessment, as well as the remaining blocking periods, which do not contain any decreasing abuse ideas, which do not correspond to art. 15 FRL and the judgment of the ECJ. There was thus no correct implementation.[227]

In particular, the explanatory note uses the phrase “presumption of abuse”. The general meaning of the term supposition is “unproven assumption, unsecured knowledge, speculation.”[228] Even according to the Code of Civil Procedure in § 292 ZPO, the legal presumption allows a counter-proof. On this basis, it can be argued that the term presumption should allow a counter-evidence, since it does not necessarily create true facts, in the case of

Abuse therefore does not have to be an actual one, which is why an abuse prevention standard should not be applied in principle. Accordingly, it can be inferred from the wording that the Federal Government also basically has the same understanding of the art. 15 FRL as well as the tax literature. Nevertheless, the implementation in the law is different, since this allows the legal user without restrictions to apply the legal consequences of abuse.[229]

The fact that the presumption of abuse decreases with advancing time is also inconclusive. Consider both the wording of § 42 AO and art. 15 FRL clearly shows that there is either an abusive arrangement or not. A decreasing presumption would therefore mean that there is less abuse the more time passes after the transfer and thus does not lead to full taxation. However, a design that is only a little abusive is not consistent, since there are no further stages between the existence of the abuse and the absence.[230]

Why a length of seven years was chosen, however, is not apparent. However, this could pose problems for the company as it is unable to ensure that no harmful divestment can occur within seven years, especially in cases where it cannot be prevented due to external influences.[231] The same applies to the deadlines of 5 years. In this regard, comparisons are often made to the parent-daughter directive, which the Member States

allows a holding period of only two years. However, it should be noted that the 1992 draft law of the Tax Amendment Act provided for a blocking period of ten years, but it was subsequently reduced to the current seven years, as they were considered appropriate and manageable.[232] Criticism of the length already occurred with the introduction of the blocking period in the 1990s. The reason for the introduction was referred to the Council protocols of the Merger Directive, which stipulated that the presumption of abuse must be sold in close proximity to the transfer. However, seven years between the events should not be considered as close in time. A period of three years is now considered suitable.[233]

The author Graw considers that an interpretation of the blocking periods in accordance with the guidelines is not the solution to the problem.[234] Art. 20 para. 3 GG, it should be noted that the wording of the law constitutes a limit of interpretation and therefore, in particular, the blocking period regulation does not allow any scope, since it is expressly stated that a blocking period infringement exists in the event of a sale or a similar event within that period. Furthermore, interpreting the possibility of counter-evidence from this is unacceptable, which does not change the directive either. An administrative decree is not sufficient to make the blocking period regulation compliant with the directive, since legal regulations are necessary for this. The addition of the conversion tax waiver is thus also inadmissible or insufficient.

7.5.1.4. Fighting abuse through conversions abroad – the example of France

The restructuring regulations in France are also based on EU regulations. Article 210 A of the CGI (Code général des impôts – General Tax Code) allows taxpayers to carry out restructurings in a tax-neutral manner. The benefit is applied only to companies subject to corporate tax which are established in the EU or in another country with which a double taxation agreement exists. In this regard, a

To prevent abusive design, the hold period regulation was also used there. This amounted to three years in transfer operations. However, as some regulations did not comply with the requirements of the Merger Directive, a change took place on 01.01.2018, which led, among other things, to the abolition of the holding periods. The reason for this was in particular the ECJ judgment of 8 March 2017 in the case of Euro Park Service. This ruling examined the regulations of the French financial administration.[235] The new standard for abuse prevention corresponds to the art. FRL 15. Accordingly, tax-neutral restructuring is not possible if the sole reason is tax evasion or avoidance. Consequently, in the event of a restructuring in favour of a foreign company, a statement must be made stating, inter alia, the reason for the restructuring.[236]

The headline of the Süddeutsche Zeitung on 05.07.2012 was: "Law gap worth 1.5 billion".[237] One of the most famous cases of § 20 UmwStG is the takeover of Porsche by VW in 2012.[238] Norbert Walter-Borjans, then Minister of Finance of North Rhine-Westphalia, said:

“The fact that VW is a German group that represents our country more than almost any other in the world, when it comes to acquiring a company with hardly any less appeal, using a gap in tax law to save a tax amount in the ten-digit euro amount is really not good news.” Let me be clear: this is not illegal behaviour. It is an exhaustion of the possibilities offered by tax law. "[239]"

In order to be able to exploit the said legal loophole, a lengthy process was necessary, which was explained in the following text by Prof. Dr. Franz Jürgen Marx and Julia Spieker, is explained.

Initially, the spin-off of the Porsche AG business (old) to Porsche AG (new) took place in 2007, after which Porsche AG (old) changed its legal form to Porsche SE, which acted as a holding company and thus included its 100 % interest in Porsche AG (new). Due to the contribution in kind, pursuant to § 20 UmwStG at book value, the shares in Porsche AG were (newly) subject to the blocking period of seven years acc. § 22 (1) S. 1 UmwStG. One

tax-free transfer at book values to the VW Group could therefore have taken place from 2014. However, in order to do this already in 2012, the following steps were necessary:

Porsche Zwischenholding GmbH was founded by Porsche SE, which holds a stake in Porsche AG from its founding. As a result, VW AG increased its capital by 49,9 %. The remaining 50.1% was retained by Porsche SE. This results in the following holdings:

Figure 2: Participation

Source: Marx/Spieker, NWB, SteuerStud No. 3 2015, 2 (2)

It was planned that Porsche SE’s stake in Porsche Zwischenholding would be transferred in full to VW AG. However, this would have led to a blocking period violation in 2012. In order to enable a tax-neutral contribution, VW AG received Porsche SE’s shares in Porsche ZH for a price of €4.46 billion plus a share in VW AG. This operation thus fulfils the requirements of § 20 UmwStG. Porsche SE’s shares in Porsche AG can be considered as a sub-operation since, after the transfer, the remaining assets of Porsche SE consisted of the shares in VW AG and liquid assets. Furthermore, the shares resulting from the capital increase were granted. The fact that these (value € 2.56) did not correspond to the value of the shares in Porsche ZH is irrelevant for the assessment of § 20 UmwStG, since the regulation only requires the granting of new shares. The additional consideration of €4.46 billion

corresponded to the tax accounting book value of the shares. The restructuring could therefore be carried out in a tax neutral manner and the seven-year blocking period was circumvented.

Due to the amendment of § 20 UmwStG, however, such a contribution to the book value is no longer possible. § 20 para 2 p. 2 no. 4 lit. a and b UmwStG stipulates that the other consideration may not be more than 25% of the book value of the transferred operating assets or a maximum of € 500,000 or even a maximum of the book value of the transferred operating assets. In the case of Porsche/VW, according to today’s legal status, VW could only make a payment of €500,000 in addition to the share.

The conversion tax law serves to enable companies both cross-border and exclusively domestic conversion operations without tax burdens. However, it is questionable whether the blocking period regulation will not even create a new kind of burden.

First of all, it can be stated that the blocking period regulation offers legal certainty to the taxable person. In the event of a divestment or a similar operation outside this period, there is no concern that the tax administration finds abuse. According to the author, however, this consequence is the only positive aspect.

The fact that the legislature uses almost exclusively an irrefutable typification in order to make such serious findings for the taxpayer is not proportionate. The meltdown of the seven-year blocking period according to § 22 UmwStG does not change this. The breach of the provisions of the Merger Directive and the explanations provided by the ECJ, which explicitly rule out the inadmissibility of standardising abuse prevention rules, once again highlight this approach. Although the statements of the ECJ only apply to the blocking period regulations that concern situations within the meaning of the Merger Directive, the author considers that these statements can also be transferred to the remaining regulations, such as those of § 18 and § 24 of the UmwStG.

Even if the blocking period regulation is not proportionate, a complete removal of this does not constitute an option. Irrespective of whether the staff of the German tax administration permits this winding-up, the introduction of a general regime, such as that of Article 15 FRL, would in many cases not lead to a correct result. This would result in each case being examined individually by the tax authorities. In cases where the question of abuse cannot be clearly answered, the result depends on the respective processor. This would create unequal treatment. The problem of the decision already arises from the provisions of § 42 AO, which is very similar to the requirements of the directive. A transfer of such formulations into the conversion tax law would therefore not be effective.

Consequently, in theory, the blocking periods are still suitable for detecting abuses, as they may be disproportionate for the taxpayer, but they are an obstacle or, where applicable, a deterrent. This could prevent abusive designs.

However, as emerges in particular from the Porsche/VW case, the blocking period regulation not only leads to deterrence, but also to the fact that situations are made more complicated in order to avoid corresponding deadlines. If there is no violation of the blocking period and the design is legally permissible in the result, no abuse may and can be ascertained, even if this would be affirmed after an overall case analysis, since the individual steps are pursued solely with the goal

were to achieve the corresponding result. The same applies to divestments that take place after seven years and one day. Also an abuse determination by the general regulation of § 42 AO is also not possible, since this results in an evaluation contradiction. This would also contradict the simplification purpose, as a result of which the special abuse prevention norms no longer seem meaningful. As a result, arrangements are created which may lead to additions to the conversion tax law in order to prevent such in the future, which could consequently make the conversion tax law increasingly confusing. Since these are usually individual cases, according to the author, they do not need any independent regulations, as this makes the law unmanageable.

As already mentioned in the literature, the possibility of a counter-evidence represents a solution to the problem, as is also provided in § 6 UmwStG by the creation of the “true reason” as a prerequisite. In principle, these regulations also serve to identify abusive arrangements by the financial administration in a simplified manner by providing precise legal requirements. The

Possibility of counter-evidence, however, could lead to this simplification being eliminated. Furthermore, there is the possibility that the same problem is created as by the complete elimination. Any taxpayer who would make a sale within the blocking period would also try to show the tax authorities that it was not due to abusive motivation. And again, there will be ambiguous cases that might be assessed differently depending on the processor.

Despite the associated problems, this approach is in the opinion of the author the better solution. If the blocking periods are completely abolished, the burden of proof lies with the financial administration. It must therefore be able to present arguments that support the abuse. However, since the intention is an internal fact, this seems problematic. Furthermore, the existing deterrent would disappear. By enabling the counter-evidence, the legal text already states that abuse exists under these conditions. The taxable person would thus be in the position to demonstrate that this is not the case.

In summary, the blocking period regulation is basically a good approach to combating abuse, but this approach needs to be developed further.

Beck’sches Steuer- und Bilanzrechtslexikon, Edition 59, Munich 2022 (quote: Editor, in: Steuer- und Bilanzlexikon, Edition 29 2022, Title paragraph)

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Fischer, Peter, On the dispute between “external theory” and “inner theory” – on the example of the knowledge of Austria. VwGH on ‘letter box companies in the Irish IFSC tax haven’, FR 2005, 585

Forester, Jutta/Mennel, Annemarie (ed.), Taxes in Europe, America and Asia, 130. Supplementary delivery, 2022 (cited: processor, in: Taxes in Europe, 130). Additional delivery 2022, Land Rn.

Gabel, Monika, Special Abuse Norms and the General Equality Theorem, StuW 2011, 3

Gehrmann, Reinald, Conversion Tax Law, NWB: InfoCenter of 28.07.2021, (2021), MAAAB-26815

Gille, Michael, Misuse Typing in the New Conversion Tax Law: Violation of the Merger Directive?, IStR 2007, 194

Gosch, Dietmar (ed.), Steuerordnung/Finanzgerichtsordnung, 1st edition, 166. Delivery, 1995 (cited: processor, in: Gosch, AO, 1st edition 1995, § paragraph 1)

Graw, Christian, On the infringement of European law of § 22 UmwStG 2006, FR 2009, 837

Haase, Florian/ Hofacker, Matthias (ed.), UmwStG – Conversion Tax Act Praxiskommtar, 3rd edition, Berlin 2021 (cited: Editors, in: Haase/Hofacker, UmwStG, 3rd edition 2021, § Rn.)

Hahn, Hartmut, Critical explanations and reflections on the draft SEStEG, IStR 2006, 797

Hannig, Tim R., New relationship of § 42 AO to special abuse legislation, NWB 2021, 3184

Heckschen, Heribert/Knaier, Ralf , Largest reform of conversion law – not only implementation of guidelines (Part I), GmbHR 2022, 501

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[1] See Hey, StuW 2008, 167 (174).

[2] See Hey, StuW 2008, 167 (174).

[3] See ECJ judgment of 12.09.2006, C-196/04, ECLI:EU:C:2006:544, paragraph 36, 49.

[4] See ECJ judgment of 12.09.2006, C-196/04, ECLI:EU:C:2006:544, paragraph 68.

[5] See Drüen, in: Tipke/Kruse, AO, 145. Delivery, 2016, § 42 paragraph 6.

[6] See Hey, StuW 2008, 167 (169).

[7] Cf. Rödder, in: R/H/L, UmwStG, 3. Edition 2019, Introduction to the UmwStG paragraph 1.

[8] Cf. Rödder, in: R/H/L, UmwStG, 3. Edition 2019, Introduction to the UmwStG paragraph 3.

[9] See Rödder, in: R/H/L, UmwStG, 3. Edition 2019, Introduction to the UmwStG paragraph 2.

[10] See Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 268.

[11] Cf. Rödder, in: R/H/L, UmwStG, 3. Edition 2019, Introduction to the UmwStG paragraph 3.

[12] See Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 268.

[13] Cf. Rödder, in: R/H/L, UmwStG, 3. Edition 2019, Introduction to the UmwStG paragraph 5.

[14] See Gehrmann, NWB: InfoCenter 2021.

[15] Cf. Schumacher, in: R/H/L, UmwStG, 3rd edition 2019, § 15 paragraph 11.

[16] See Hey, StuW 2008, 167 (170).

[17] See Hey/Kirchhof/Ismer, in: H/H/R, EStG/KStG, 297. Delivery 2020, introduction to EStG Rn. 61.

[18] See Schaumburg, in: Schaumburg International Tax Law, 4th edition 2017, Part 1, Chapter 2, paragraph 2 1.

[19] See BFH judgment of 3.12.1969, II 162/65, paragraph 12.

[20] See Hey/Kirchhof/Ismer, in: H/H/R, EStG/KStG, 297. Delivery 2020, Introduction to EStG Rn 62

See Hey, StuW 2008, 167 (172) cited in Seer/Schneider, BB 1999, 872 (878).

[22] FG Hamburg, Decision of 29.8.2017 – 2 K 245/17, paragraph 73.

[23] See Hey/Kirchhof/Ismer, in: H/H/R, EStG/KStG, 297. Delivery 2020, Introduction to EStG Rn. 63.

[24] See Hey/Kirchhof/Ismer, in: H/H/R, EStG/KStG, 297. Delivery 2020, Introduction to EStG Rn. 63.

[25] See Hey/Kirchhof/Ismer, in: H/H/R, EStG/KStG, 297. Delivery 2020, Introduction to EStG Rn. 64.

[26] Cf. Drüen, in: Tipke/Kruse, AO, 145. Delivery, 2016, § 42 paragraph 1.

[27] Cf. Stöber, in: Gosch, AO, 1. 1995 edition, § 42 paragraphs 10 et seq.

[28] See BFH judgment of 7.3.2001, XR 192/96, paragraph 17; Fisherman, in: H/H/S, AO, 208. Delivery 2010, § 42, paragraph 62.

[29] See Drüen, in: Tipke/Kruse, AO, 145. Delivery 2016, § 42 paragraph 27.

[30] See Hannig, NWB 2021, 3184 (3184).

[31] See Drüen, StuW 2008, 154 (156).

[32] See BFH, judgment of 14.1.2003, IX R 5/00, paragraph 12.

[33] See Drüen, in: Tipke/Kruse, AO, 145. Delivery 2016, § 42 paragraph 44.

[34] See Baum, in: B/B/B/S, AO, 2016, § 42, paragraph 51.

[35] See Drüen, in: Tipke/Kruse, AO, 145. Delivery 2016, § 42 paragraph 8.

[36] See Fischer, FR 2005, 585.

[38] See Söffing, BB 2004, 2777 (2778).

[39] See Söffing, BB 2004, 2777 (2786).

[40] See Fischer, in: H/H/S, AO, 208. Delivery 2010, § 42 Rn.73 f.

[41] See Hüttemann, DStR 2015, 1146 (1147).

[42] See Hey, Beihefter zur DStR 3 2014, 8 (8).

[43] See Hannig, NWB 2021, 3184 (3186).

[44] See Hey, StuW 2008, 167 (169).

[45] See Hey, StuW 2008, 167 (171) quoted after: K.-D. Drüen, § 42 AO Rz. 18 (Nov. 2007).

[46] See BVerfG, Decision of 12.4.1997, 2 BvL 77/92, paragraph 33 – Christmas allowance; BVerfG, Decision of 30.5.1990, 1 BvL 2/83, paragraph 90 – Protection against dismissal; BVerfG, Decision of 31.5.1988, 1 BvL 520/83, paragraph 36 – Minimum subsistence level.

[47] See BVerfG, judgment of 31.5.1990, 2 BvL 12/88, paragraph 111.

[48] See Hannig, NWB 2021, 3184 (3186).

[49] See BFH, judgment of 20.3.2002, I R 63/99, paragraph 24; BFH, judgment of 29.1.2008, I R 26/06, paragraph 13.

[50] See Hey, Beihefter zu DStR 3 2014, 8 (9).

[51] Cf. Stöber, in: Gosch, AO, 1. 1995 edition, § 42, paragraph 52.

[52] See Drüen, Ubg 2008, 31 (31); Hüttemann, DStR 2015, 1146, 1149.

[53] See Hannig, NWB 2021, 3184 (3187).

[54] See BFH, judgment of 17.11.2020, I R 2/18.

[55] BFH, judgment of 17.11.2020, I R 2/18, paragraph 20.

[56] See BFH, judgment of 17.11.2020, I R 2/18, paragraph 21.

[57] See Hey, StuW 2008, 167 (173).

[58] See UmwStE Tz. 02.09.

[59] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 2 R1.

[60] See UmwStE Tz 02.10.

[61] See Geils, in: Haase v Hofacker, UmwStG, 3rd edition 2021, § 2 paragraph 6.

[62] See Geils, in: Haase v Hofacker, UmwStG, 3rd edition 2021, § 2 paragraph 6.

[63] See UmwStE Tz 02.03.

[64] See Pupeter, in: Widmann v Bauschatz, UmwStG, 2021, § 2 paragraph 245.

[65] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 2 R 117.

[66] See van Lishaut, in: R/H/L, UmwStG, 3rd edition 2019, § 2 paragraph 169.

[67] See Widmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 2 paragraph 120.

[68] See Geils, in: Haase v Hofacker, UmwStG, 3rd edition 2021, § 2 paragraph 174.

[69] Cf. Birkemeier, in: R/H/L, UmwStG, 3rd edition 2019, § 6 paragraph 2.

[70] See Schmitt, in: Hörtnagl/Schmitt, UmwStG, 9th edition 2022, § 6 paragraph 8.

[71] Cf. Schmitt, in: Hörtnagl/Schmitt, UmwStG, 9th edition 2022, § 6 paragraph 1.

[72] See Martini, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 6 paragraph 10.

[73] Cf. Beutel/Ruoff/Tommaso/Sistermann/Schneider, in: Lüdicke/Sistermann, UmwStG, 2nd edition 2018, § 12 paragraph 378.

[74] Cf. Beutel/Ruoff/Tommaso/Sistermann/Schneider, in: Lüdicke/Sistermann, UmwStG, 2nd edition 2018, § 12 paragraph 380.

[75] See Martini, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 6 paragraph 21.

[76] See Jäschke/Illing, in:Widmann/Bauschatz, UmwStG, 2015, § 6 paragraph 45.

[77] See Martini, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 6 paragraph 254.

[78] See Martini, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 6 paragraph 255.

[79] See Birkemeier, in: R/H/L, UmwStG, 3rd edition 2019, § 6 paragraph 102.

[80] See Martini, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 6 paragraph 220.

[81] See BFH, judgment of 19.12.1984, I R 275/81, paragraph 14.

[82] See Jäschke/Illing, in: Widmann/Bauschatz, UmwStG, 2015, § 6 paragraph 56.

[83] See Schumacher, in: R/H/L, UmwStG, 3rd edition 2019, § 15, paragraph 130.

[84] Cf. Schießl, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 15 paragraph 107.

[85] See Schumacher, in: R/H/L, UmwStG, 3rd edition 2019, § 15, paragraph 132.

[86] See Jacobsen/Happel, in: Widmann/Bauschatz, UmwStG, 2015, § 15, paragraph 86 f.

[87] See UmwStE Tz 15.18.

[88] See UmwStE Tz 15.17.

[89] Cf. Dvorschak, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 15 paragraph 108.

[90] Cf. Dvorschak, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 15 paragraph 109.

[91] See Jacobsen/Happel, in: Widmann/Bauschatz, UmwStG, 2015, § 15, paragraph 95.

[92] Cf. Dvorschak, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 15 paragraph 134; Schumacher, in: R R/

H/L, UmwStG, 3rd edition 2019, § 15 paragraph 242; against: Schießl, in: Widmann/Mayer, UmwStG, 1st edition 2002, § 15 paragraph 294.

[93] See BMF letter of 18.12.2013 (IV C 2 – S 1978-b/0-01, 2013/1090738).

[94] See Dvorschak, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 15, paragraph 135.

[95] Ibd.

[96] Vg. BFH, judgment of 11.8.2021, I R 39/18, paragraph 31.

[97] See Neumann, GmbHR 2012, 141 (147).

[98] See Schrameyer, in Lippross/Seibel, StR, 131. Delivery 2022, § 18 paragraph 1.

[99] See Trossen, in: R/H/L, UmwStG, 3rd edition 2019, § 18 paragraph 7.

[100] Cf. Schießl, in: Widmann/Mayer, UmwStG, 1st edition 2002, § 18 paragraph 15.

[101] Cf. Schrameyer, in Lippross/Seibel, StR, 131. Delivery 2022, § 18 paragraph 13.

[102] Cf. Roser, in: Haase v Hofacker, UmwStG, 3rd edition 2021, § 18 paragraph 3.

[103] Cf. Schießl, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 18, paragraph 252 f.

[104] See UmwStE Tz 18.09; In this regard, the Commission considers that the measure is compatible with the internal market.

[105] See Levedag, in: Widmann v Bauschatz, UmwStG, 2015, § 18, paragraph 56.

[106] See Trossen, in: R/H/L, UmwStG, 3rd edition 2019, § 18, paragraph 55.

[107] See Schmitt, in: Hörtnagl v Schmitt, UmwStG, 9th edition 2022, § 18, paragraph 35.

[108] See Levedag, in: Widmann/Bauschatz, UmwStG, 2015, § 18 paragraph 50; Trossen, in: R/H/L, UmwStG, 3rd edition 2019, § 18 paragraph 56.

[109] Cf. Schrameyer, in Lippross/Seibel, StR, 131. Delivery 2022, § 18, paragraph 67.

[110] Cf. Roser, in: Lenski/ Steinberg, GewStG, 141. Delivery 2022, § 7 paragraph 374a.

[111] See BFH, judgment of 28.5.2015, IV R 27/12.

[112] See Wernsmann, DStR 2008, 221.

[113] See BFH, judgment of 16.11.2005, X R 6/04; BFH, judgment of 20.11.2006, VIII R 45/05.

[114] Cf. Schießl, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 18, paragraph 165.

[115] Cf. Schießl, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 18 paragraph 182.

[116] Cf. Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 para. 1.

[117] Cf. Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 paragraph 10.

[118] Cf. Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 paragraph 12.

[119] Cf. Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 paragraph 29 f.

[120] See Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20, paragraph 40.

[121] See Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20, paragraph 43.

[122] Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 Rn. 46 ff.

[123] Cf. Bäuml, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, §20 paragraph 128.

[124] See Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20 paragraph 125.

[125] See Koch, in: Widmann/Bauschatz, UmwStG, 2021, § 20, paragraph 161.

[126] Cf. Bäuml, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, §20, paragraph 156 f.

[127] Cf. Bäuml, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, §20, paragraph 409.

[128] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 20 R 460 f.

[129] Cf. Bäuml, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, §20, paragraph 402.

[130] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 20 R 241.

[131] See Widmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 20 R 244.

[132] See Bäuml, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, §20, paragraph 405.

[133] Cf. Stangl, in: R/H/L, UmwStG, 3rd edition 2019, § 22 paragraph 1.

[134] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, paragraph 22(7).

[135] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 22 paragraph 8.

[136] See Stangl, in: R/H/L, UmwStG, 3rd edition 2019, § 22, paragraph 40.

[137] See Stangl, in: R/H/L, UmwStG, 3rd edition 2019, § 22, paragraph 43.

[138] Cf. Wulff-Dohmen, in: Haase v Hofacker, UmwStG, 3rd edition 2021, § 22 paragraph 52.

[139] See Widmann, in: Widmann/Mayer, UmwStG, 1st edition 2002, § 22 paragraph 18.

[140] See BFH, judgment of 24.1.2018, I R 48/15, paragraph 19.

[141] Cf. Kessler, Ubg 2011, 34 (34).

[142] See Wochinger, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 22 paragraph 51 f.

[143] See Kessler, Ubg 2011, 34.

[144] See UmwStE Tz 22.23.

[145] See UmwStE Tz 22.23.

[146] Ibd.

[147] Cf. Schrameyer, in Lippross/Seibel, StR, 131. Delivery 2022, § 18 paragraph 6.

[148] Cf. Prinz, DB 2021, 1903 (1907).

[149] See Stangl, in: R/H/L, UmwStG, 3rd edition 2019, § 22, paragraph 50.

[150] See Widmann, in: Widmann/Mayer, UmwStG, 1st edition 2002, § 22 paragraph 11.

[151] Cf. Widmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 22(12) f.

[152] See Kessler, Ubg 2011, 34 (34).

[153] See Widmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 22, paragraph 193.

[154] See Wochinger, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 22, paragraph 44.

[155] See UmwStE Tz 22.17.

[156] Cf. Trautmann, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 24 paragraphs 62 et seq.

[157] Cf. Trautmann, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 24 paragraph 23.

[158] See Bauschatz/Levedag, in: Widmann/Bauschatz, UmwStG, 2015, § 24, paragraph 74.

[159] Cf. Trautmann, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 24 paragraphs 34 et seq.

[160] Cf. Trautmann, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 24 paragraphs 72 et seq.

[161] Cf. Trautmann, in: Kraft v Edelmann, UmwStG, 2nd edition 2019, § 24 paragraph 16.

[162] Cf. Rasche, in: R/H/L, UmwStG, 3rd edition 2019, § 24 paragraph 3.

[163] Cf. Rasche, in: R/H/L, UmwStG, 3rd edition 2019, § 24 paragraph 2.

[164] Cf. Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 24, paragraph 1508.

[165] Cf. Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, paragraph 24, paragraph 1514.

[166] See Bauschatz, Levedag in: Widmann v Bauschatz, UmwStG, § 24, paragraph 207; Rasche, in: R/H/L, Umw-StG, 3rd edition 2019, § 24 Rn 180; Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, § 24, paragraph 1591.

[167] See Bauschatz/Levedag, in: Widmann/Bauschatz, UmwStG, 2015, § 24, paragraph 190.

[168] Cf. Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, paragraph 24, paragraph 1485; Bauschatz/Levedag in: Widmann/Bauschatz, UmwStG, 2015, § 24 paragraph 240.

[169] See Fuhrmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 24, paragraph 1486.

[170] See UmwStE Tz 24.21.

[171] Cf. Fuhrmann, in: Widmann/Mayer, UmwStG, 1. 2002 edition, paragraph 24, paragraph 1487 f.

[172] See Fuhrmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 24, paragraph 1488.

[173] Cf. Prinz, DB 2021, 1903 (1903).

[174] See Heckschen/Knaier, GmbHR 2022, 501 (501).

[175] See Benecke/Schnitger, IStR, 606 (606).

[176] See Rauch/Schanz, NWB SteuerStud No. 1 2009, 4 (4).

[177] See Heckschen/Knaier, GmbHR 2022, 501 (501).

[178] See Benecke/Schnitger, IStR, 606 (606).

[179] See Fey, in: Tax and Balance Sheet Lexicon, Edition 29 2022, Merger Directive, paragraph 4.

[180] See Heckschen/Knaier, GmbHR 2022, 501 (504).

[181] See Rauch/Schanz, NWB SteuerStud Nr. 1 2009, 4 (4).

[182] See Fey, in: Tax and Balance Sheet Lexicon, Edition 29 2022, Merger Directive, paragraph 2.

[183]Cf. Directive 2009/133/EC

[184]Cf. Directive 2009/133/EC

See judgment of the Court of Justice in Case C-285/07 ECLI:EU:C:2008:705, paragraphs 26 et seq.

[186] See Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 266.

[187] Cf. Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 273.

[188] See Fey, in: Steuer- und Bilanzlexikon, Edition 29 2022, Fusionsrichtlinie, paragraphs 6 et seq.

[189] See R Rauch v Schanz, NWB SteuerStud Nr. 1 2009, 4 (8).

[190] See Krebs, Grin 2004, p. 9.

[191] See Cortez/Schmidt, NWB 2021.

[192] See Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 269.

[193] See Cortez/Schmidt, NWB 2021.

[194] See ECJ judgment of 13.12.2005, C-411/03, ECLI:EU:C:2005:762, paragraph 24.

See judgment of the Court of Justice in Case C-411/03 ECLI:EU:C:2005:762, paragraphs 28 et seq.

[196] See Rauch v Schanz, NWB SteuerStud No. 1 2009, 4 (5).

[197] See Benecke, Reform des UmwStR, paragraph 2.

[198] See Heckschen, Knaier, GmbHR 2022, 501 (502).

SEGMENT002 [199] See Gille, IStR 2007, 194 (196).

[200] See Gröpl, in: Handbook of EU Business Law, 55th edition 2022, Tax Law, paragraph 270.

[201] See Cortez/Schmidt, NWB 2021.

[202] See Fey, in: Tax and Balance Lexicon, Edition 29 2022, Merger Directive, paragraph 19 et seq.

[203] See Rauch/Schanz, NWB SteuerStud Nr. 1 2009, 4 (5).

[204] See Gille, IStR 2007, 194 (195).

[205] See Fey, in: Tax and Balance Lexicon, Edition 29 2022, Merger Directive, paragraph 22.

[206] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369.

[207] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369, paragraph 41.

[208] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369, paragraph 42.

[209] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369, paragraph 45.

[210] See Gille, IStR 2007, 194 (194).

[211] See Graw, FR 2009, 837 (839).

See judgment of the Court of Justice in Case C-28/95 ECLI:EU:C:1997:369, paragraph 44.

[213] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369, paragraph 48.

[214] See ECJ judgment of 8.3.2017, C-14/16, ECLI:EU:C:2017:177, paragraph 19.

See judgment of the Court of Justice in Case C-14/16 ECLI:EU:C:2017:177, paragraphs 20 et seq.

[216] See Körner, IStR 2006, 469 (471).

[217] See FR 2022, 215 (220).

[218] See Gille, IStR 2007, 194 (198).

SEGMENT022 [219] See Gille, IStR 2007, 194 (198).

[220] See ECJ judgment of 17.7.1997, C-28/95, ECLI:EU:C:1997:369.

[221] Ibd.

[222] See Graw, FR 2009, 837 (840).

Judgment of the Court of Justice in Case C-196/04 ECLI:EU:C:2006:544, paragraph 64.

[224] See Widmann, in: Widmann v Mayer, UmwStG, 1st edition 2002, § 22 paragraphs 192, 342.

[225] See ECJ judgment of 12.9.2006, C-196/04, ECLI:EU:C:2006:544, paragraph 70.

[226] See Bundesrat, Drucksache 542/06, p. 75.

[227] See Gille, IStR 2007, 194 (198).

[228] https://www.dwds.de/wb/Presumption Accessed on 20.07.2022

[229] See Hahn, IStR, 2006, 797 (805).

[230] Ibd.

[231] See Korne, IStR 2006, 469 (471).

[232] See Rauch/Schanz, NWB SteuerStud Nr. 1 2009, 4 (4).

[233] Ibd.

[234] See Graw, FR 2009, 837 (841 ff.)

[235] See ECJ judgment of 8.3.2017, C-14/16, ECLI:EU:C:2017:177.

[236] See Cadet/Hellio/Fermine, in: Taxes in Europe, 130. Additional delivery 2022, France, paragraphs 225 et seq.

[237] See https://www.sueddeutsche.de/wirtschaft/vw-uebernahme-porsche-steuerfrei-gesetzluecke-im-wert-of-1-5-billion-1.1402443, accessed on 18.07.2022.

[238] https://www.haufe.de/steuer/kanzlei-co/porsche-deal-vw-ütz-umwandelssteuerrecht-schick-aus 170 124760.html, accessed on 18.07.2022; https://www.meyers-partner.ch/fachvideos/vw-porsche-steuer-trick-Umwandellung/, accessed 18.07.2022

[239] Cf. Plenary Protocol of the Federal Council No. 899, 6.7.2012, stenographic report, p.

[240] See Marx/Spieker, NWB, SteuerStud Nr. 3 2015, 2 (2).