date | theme

25. April 2017 | Use loss carry forward in the GmbH purchase

23. August 2018 | GmbH loss carry forward: § 8c KStG unconstitutional -> Objection & deadline (this contribution)

11. November 2018 | Save the loss carry forwards at the GmbH: the new § 8d KStG helps!

17. February 2019 | Buy loss carryforwards from GmbH: 6 new strategies for the use of losses

09. May 2019 | Continuation-related loss carry forward according to § 8d KStG

§8c KStG has so far regulated the sinking of loss carry forwards in corporations. In the event of the sale of a limited company (e.g. a GmbH), this provision led to the cancellation of loss carry forwards. The Federal Constitutional Court has now classified the norm as unconstitutional, so that the provision changes retroactively from January 1, 2008. For taxpayers and consultants, the losses from the old years should now have to be recovered (for example, GmbH loss carry forwards).

Loss carry forward</h2>

Significance of loss carry forwards of a GmbH

Loss carry forwards are of considerable importance for companies for tax purposes. If a company makes losses, they are carried forward into subsequent years. The loss carry-forwards reduce the tax burden in the coming years. For this purpose, the tax consultant offsets the accumulated losses with the annual profit of the current year. Corporations, such as the GmbH, often accumulate losses over several years, so these can be offset with the profits from several years. As a result, loss carry forwards have a tax-saving effect.

Why are losses lost in a sale of the corporation?

§8c para. 1 KStG so far ensures the sinking of accumulated losses. If a GmbH sold a share of more than 25 %, this was previously considered a so-called “harmful share acquisition”. In accordance with the provision, the losses were to be forfeited in the amount of the sold share, so that they were no longer usable for tax purposes. For example, the sale of a GmbH share of 30 % caused the loss of 30 % of the accumulated loss carry forwards. If a GmbH shareholder even sold more than 50 % of his capital company, the tax office even completely cancelled the losses. In 2017, we already reported on the loss reduction and use of the losses in the company purchase.

3. What is changing for corporations?

The so-called “harmful acquisition” is now only valid from a limit of 50%. The limit of 25 % was classified by the Federal Constitutional Court as arbitrary and thus unconstitutional, which is why the legislature approved § 8c para. 1 KStG must now be adjusted by 31 December 2018. In the future, taxpayers will not have to fear loss loss for a share sale of less than 50%.

Taxpayers cannot recover all old losses. Losses from existing tax assessments are usually lost. If loss carry forwards were contested by an objection, the reimbursement is likely. Therefore, shareholders of corporations should have their tax advisors check which losses can be “saved”. Advisors should from now on keep affected tax assessments open by means of objection.

Does a lawsuit have to be filed?

No. Since the affected regulation in the law has even been repealed in the meantime, the tax offices must take the decision of the Federal Constitutional Court into account. If this is not done, you must file an objection.