Source: https://www.beissenhirtz.com/en/ecj-%C2%A7-8c-1a-kstg-sanierungsklausel-is-legitimate/
Timestamp: 2018-11-16 23:13:44
Document Index: 220344020

Matched Legal Cases: ['§ 8', '§ 8', '§ 8', '§ 3', '§ 3', '§ 8']

ECJ: § 8c 1a KStG (“Sanierungsklausel”) is legitimate! – Beissenhirtz
13. July 2018 21. August 2018
Bombshell from Brussels: The European Court of Justice (ECJ) recently upheld the so-called “restructuring clause” (“Sanierungsklausel“) of § 8c para 1a German Corporate Tax Code (“Körperschaftssteuergesetz“, “KStG“) and overruled the previous judgement of the European Court of First Instance from 2016 and the respective decision of the European Commission which both had declared the Sanierungsklausel as nil and void. As a consequence, shares of a company may now be transferred to potential investors as part of a corporate turnaround using the accumulated loss carry-forward of the company.
The European Court of First Instance, in its judgment of 2016, had upheld the EU Commission’s decision of 2011, according to which the Sanierungsklausel would constitute unlawful state aid (see here). Now, in its judgement as of 28 June 2018, the ECJ stated that the Commission and the ECJ had wrongly assessed the reference system required to establish (unlawful) state aid in relation to the so-called ‘selective nature’ of the Sanierungsklausel . According to the court, the Commission did not correctly assess the “selectivity of a fiscal measure on the basis of a reference system consisting of some provisions artificially extracted from a broader legal framework in the “rule exception” test it applied […]. By excluding the general rule on the loss brought forward from the reference system applicable in the present case, the General Court thus clearly defined the system too narrowly” (see paragraph 106 of the judgment).
The ECJ accordingly lifted the first-instance judgment of the European Court of First instance concerning “GFKL Financial Services AG” and annulled the corresponding decision of the European Commission. The direct legal consequence of the judgment is that § 8c para 1a KStG is now applicable – and probably also retroactively – to transfers of shares in reorganization situations. Indirectly, however, this judgment could also provide for an acceleration in the approval procedure of the European Commission regarding § 3a EStG (“Sanierungslass in Gesetzform“, see more about this here). For § 3a EStG is based on the same rule-exception principle as § 8c para 1a KStG.
ECJ, judgmt 28.06.2018 – C-219/16 P („Lowell Financial Services GmbH, vormals GFKL Financial Services AG“; in German or French only)