Effective January 2, 2025, new guidelines from the Federal Ministry of Finance (BMF) regarding the application of the Conversion Tax Act (UmwStG) have taken effect. The BMF letter dated August 1, 2025, clarified the rules regarding the so-called “post-split disposal restriction” to prevent tax avoidance arrangements related to tax-damaging dispositions of shares. The adjustments pertain in particular to the treatment of indirect dispositions through affiliated companies and the retroactive effect when establishing tax-unified groups.
Tax-Detrimental Sales of Shares
Under Section 15(2) of the German Tax on Corporate Restructuring Act (UmwStG), the direct or indirect sale of shares in a corporation involved in a demerger (i.e., the transferring or acquiring legal entity) constitutes a so-called tax-adverse sale of shares under certain conditions. For tax purposes, only sales to outside third parties are relevant—that is, to individuals or companies that do not belong to the corporate group or business association. Sales within a corporate group are generally not considered detrimental if they take place within the scope of the so-called “group exception” (Section 15(2), sentence 7, of the German Corporate Tax Act (UmwStG)).
As a general rule, a sale is considered detrimental if more than 20 % of the shares are sold to outside parties within five years of the tax transfer date (Section 15(2), sentence 4, UmwStG). However, the restriction also applies if there was already an intention to sell to third parties at the time of the demerger (Section 15(2), sentence 2, of the German Corporate Tax Act (UmwStG))—regardless of the extent of the subsequent sale.
What changes as a result of the BMF letter?
The BMF letter clarifies that indirect sales—that is, sales made through affiliated intermediary companies—may also be considered detrimental. This applies in particular when a transfer within the corporate group that was initially tax-neutral has taken place beforehand.
Illustrative case scenario (from the BMF letter):
A GmbH spins off a business unit to a sister company in a tax-neutral manner (25% share of the value). The equity interest in this company is initially transferred within the group. Subsequently, a sale takes place:
1. by the parent company at the level of the intermediate company
2. directly through the intermediate company itself, or
3. indirectly through another investment company
In all three cases—despite the fact that the transactions initially took place within the corporate group—the sale of shares is considered detrimental for tax purposes, since the transfer indirectly results in an outside purchaser. The provision therefore focuses on the economic outcome of the sale, not on its formal intermediate steps. Even if only 15% of the value of the shares was transferred initially, the sale is deemed detrimental if the intention to sell already existed at the time of the spin-off.
Retroactive Effect on Partnerships
The highest tax authorities reaffirmed this view in 2024 and published it in identical rulings (BStBl I 2024, p. 383 ff., Marg. Notes 30–33). While they acknowledge the general priority of the acquisition tax under § 1 (2a) and (2b) of the Real Estate Transfer Tax Act (GrEStG), however, an assessment under Section 1(3) of the GrEStG should only be avoided if the signing and closing occur simultaneously; if the two events do not coincide, subsequent exemption from taxation at the time of signing is subject to the strict formal and time-limit requirements described above.
While this view has not yet been fundamentally overturned, it has at least been called into question on legal grounds in a ruling by the Federal Fiscal Court (BFH), which—in a case where one of the notices was not received by the deadline—granted a so-called suspension of enforcement (known as “AdV”) due to serious doubts regarding the legality of the regulation (BFH, ruling of July 9, 2025 – II B 13/25). In this case, the taxpayer is not yet required to pay the tax liability that is in question and is being challenged in the appeal.
In particular, the Federal Fiscal Court (BFH) did not agree with the substantive order of priority among the supplementary conditions—as advocated by the tax authorities—with respect to a specific cut-off date. The BFH does not view the introductory sentence of Section 1(3) of the Real Estate Transfer Tax Act (GrEStG) as subject to any temporal limitation, not even following the insertion of Sections 16(4a) and (5) of the GrEStG as part of the 2022 Annual Tax Act (JStG 2022).
Conclusion
The new guidance in the BMF letter emphasizes that, in the case of planned restructurings, the subsequent sale of shares—including indirect sales—must be examined with the utmost care. The fact that a transaction is tax-neutral within the group does not preclude a subsequent sale outside the group from being retroactively classified as detrimental. This applies in particular to multi-tiered group structures involving potential sales to external parties.
