The so-called "Sanierungserlass" issued by the Federal Ministry of Finance (BMF) was intended to grant tax relief on restructuring gains. The Bundesfinanzhof (BFH) has now ruled that the Sanierungserlass may not be applied retroactively.
Background:
By decision of 28 November 2016, the Grand Senate of the BFH had already rejected the Sanierungserlass on the grounds that it violates the principle of the lawfulness of administration.
Following this ruling, the BMF instructed the tax offices to continue applying the decree without restriction in all cases in which the creditors involved in the restructuring had finally waived their claims by 8 February 2017 at the latest (see circular of 27 April 2017).
In two further rulings (BFH of 23 August 2017, Az. I R 52/14 and X R 38/15), the BFH has now decided that this BMF directive violates the principle of the lawfulness of administration in the same way as the Sanierungserlass itself. In the BFH's view, only the legislature could have enacted such a provision.
Because the BMF directive violates the principle of the lawfulness of administration, courts may not apply the Sanierungserlass to legacy cases either.
In the meantime, the Act against Harmful Tax Practices in Connection with the Licensing of Rights of 27 June 2017 introduced application-based tax exemption provisions for restructuring gains (see § 3a EStG and § 7b GewStG). According to the BFH, these provisions therefore do not apply to legacy cases.
Source: BFH
Frequently asked questions
Frequently asked questions
What does the BMF restructuring decree state?
The restructuring decree (Sanierungserlass) of the Bundesministerium der Finanzen provided that profits arising from creditors' waiver of claims in the course of a corporate restructuring (restructuring gains) could be granted tax relief. On this basis, the tax authorities were able to defer or waive taxes on such restructuring gains. However, the Grand Senate of the BFH rejected the decree by ruling of 28 November 2016, holding that it violated the principle of administrative legality.
Can the restructuring decree still be applied to legacy cases prior to 8 February 2017?
No. In its rulings of 23 August 2017 (I R 52/14 and X R 38/15), the BFH held that the BMF's transitional rule for legacy cases also violates the principle of administrative legality. Accordingly, courts may not apply the restructuring decree even where creditors definitively waived their claims on or before 8 February 2017. Only the legislator could have enacted such a transitional rule.
What statutory rule currently governs the tax exemption of restructuring gains?
The Act against Harmful Tax Practices in Connection with the Licensing of Rights of 27 June 2017 introduced application-based tax exemptions for restructuring gains. The relevant provisions are § 3a EStG for income and corporate income tax, and § 7b GewStG for trade tax. The exemption requires a corresponding application by the taxpayer.
Do the new tax exemptions under § 3a EStG and § 7b GewStG also apply to legacy cases?
According to the BFH, the statutory tax exemption provisions in § 3a EStG and § 7b GewStG do not apply to legacy cases, i.e. restructurings involving debt waivers prior to the entry into force of the new rules. Affected companies can therefore rely neither on the overturned restructuring decree nor on the new provisions.
Why does the Sanierungserlass (restructuring decree) violate the principle of the legality of administration?
The principle of legality requires that tax benefits have a statutory basis. The Sanierungserlass, however, was merely an administrative directive issued by the BMF without statutory authorization and granted equitable relief on substantive grounds across an entire category of cases. In doing so, the administration assumed a role that, according to the BFH, is reserved exclusively for the legislator.