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Application of the restructuring clause, Article 8c (1a) of the German Corporate Income Tax Act


When acquiring shares and replacing shareholders in this process, it is advisable for companies to keep an eye on losses that have not yet been utilised. The utilisation of losses made in the past primarily depends on the percentage of the shareholding acquired. If less than 50 percent of shares in a company is acquired by a shareholder directly or indirectly within five years, the existing losses can be further utilised in an unchanged way. However, if more than 50 percent of the shares is acquired directly or indirectly by the same acquirer within five years, this is referred to as a harmful acquisition of shares pursuant to Article 8c (1) sentence 1 of the German Corporate Income Tax Act. Under that provision, losses existing but not utilised up to that point can no longer be utilised. An exception to this principle is the so-called restructuring clause under Article 8c (1a) of the German Corporate Income Tax Act. According to that clause, such acquisition of shares is not deemed to be harmful if the shares were acquired for the purpose of restructuring the company. The option to utilise losses is not forfeited at the company level and the losses can continue to be utilised.

To be able to apply the restructuring clause, however, it is mandatory that all of the conditions described below are met.


The shares must be acquired for the purpose of restructuring and the acquirer must have the intention to restructure the company. Thus, there must exist an ultimate nexus between the acquisition of the shares and the restructuring of the company. It is assumed that the acquirer has the intention to restructure the company if the acquirer had knowledge of the need to restructure the company already before acquiring it. Such intention is also assumed to exist if there is a temporal relationship between acquiring the company and developing a restructuring plan or if one of the measures listed in Article 8c (1a) sentence 3 of the German Corporate Income Tax Act is implemented. In addition to the intention to restructure the company, the restructuring process must actually take place. Specifically, this means that measures aimed at avoiding insolvency or indebtedness and at the same time maintaining essential company structures of the company should be taken.

Maintenance of essential company structures

To maintain essential company structures, the company must take one of the three measures alternatively:
  • Adhering to a works agreement containing employment arrangements;
  • Safeguarding of employment by complying with the ‘sum of wages’ regulation (Lohnsummenregelung); or
  • Contribution of substantial business assets.
The first alternative (works agreement) is based on a measure arising from works constitution law. However, it is not a prerequisite that the company must have a works council. If it doesn't, the company may conclude individual agreements with its employees that contain employment arrangements. At least half of the employees subject to social security contributions must agree to this individual agreement.

Alternatively, the maintenance of the essential company structures is also possible via the ‘sum of wages’ regulation. The sum of relevant annual total wages within the company to be restructured may not fall below 400 percent of the so-called Ausgangslohnsumme (5 years’ average wage total) within five years following the acquisition of the shareholding.

The third alternative is the contribution of substantial business assets by the acquirer. A substantial business asset is deemed to be contributed if new business assets equal to at least 25 percent of the assets included in the last tax balance sheet are contributed to the company within twelve months following the acquisition of the shareholding. The percentage of the minimum contribution decreases accordingly if less than 100 percent of shares is acquired. Due to the restructuring effect, the acquirer can also make a contribution in form of waiving valuable claims against the company. 


If the conditions described above are met for an acquisition of shares, the restructuring clause can be applied. This prevents the forfeiture of existing losses, as the acquisition of a shareholding for the purpose of restructuring is not considered a harmful acquisition. The application of the clause rewards the voluntary commitment of the new shareholder who joins a company in times of crisis. In view of the economic consequences of the ongoing coronavirus pandemic, the importance of this restructuring clause could increase significantly in the near future.

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