Federal Council approves "Annual Tax Act 2018"

The so-called Annual Tax Act 2018 is "through" with the approval of the Bundesrat. To finalise the legislative process, it now only needs to be signed into law by the Federal President and published in the Federal Law Gazette. In our TAXGATE News already presented the Federal Government's draft. We summarise the main changes to the final law below:

• No pro rata elimination of loss carryforward for corporations due to change of shareholder up to 50%Complete cancellation of the regulations on pro rata loss forfeiture by deleting the previous Section 8c (1) sentence 1 KStG with retroactive effect from 2008. The complete forfeiture of income tax loss carryforwards for share transfers of more than 50 % within five years is retained.
• Fund investments by controlled companies / gross methodThe government draft already provided for the partial investment tax exemptions for mutual investment funds to be applied only at the level of the controlling company in the case of a controlled company as a fund investor and for the investment income of the controlled company to be attributed "gross" to the controlling company. This gross method is now also extended to the application of various tax exemptions for income from special investment funds. This applies, for example, to the application of Section 8b KStG (95% tax exemption) as part of the so-called transparency option), although the shareholdings of the controlled company and the controlling company are not added together for the purposes of the 10% limit for free float shares.
• Transition to InvStG 2018 / Declaration of the notional capital gain as at 31 December 2017The declaration for the separate determination of the notional capital gain for so-called old units in the transition to the new investment tax law must generally only be submitted by business investors. If fund units are held by partnerships, an assessment procedure is provided for if the old units were held by commercial co-entrepreneurships. In the case of asset-managing partnerships, business investors are required to make their own declarations.
• Tax-free reorganisation income. The tax exemptions for reorganisation income (Section 3a EStG, Section 7b GewStG) were previously subject to a decision by the EU Commission that the regulations do not constitute unlawful state aid. In the meantime, the EU Commission has published a so-called comfort letter, meaning that the reservation has now been lifted.
• Inheritance tax exemption requirement test: An extended retention period of seven years, which previously only applied to cases of the so-called option exemption (see section 19a para. 5 sentence 2 ErbStG), is stipulated for the so-called exemption requirement test (section 28a para. 1 sentence 1 ErbStG). § Section 28a para. 4 ErbStG also contains resolutory conditions for a tax remission in cases of a tax exemption needs test. Further conditions are regulated in which the tax remission is cancelled retroactively (e.g. change in valuations; change in the tax assessment).

Yours TAXGATE Team is available to answer your questions at any time.