In its ruling dated 9 November 2023 (case no. IV R 9/21), the BFH decided on the taxation of so-called earn-out payments that these purchase price components are (only) taxable as subsequent business income at the time of receipt. This raises the further question of whether the agreement of earn-out payments as a whole jeopardizes the advantageous taxation of sale gains in accordance with § 34 para. 3 German Income Tax Act (EStG).
A so-called due diligence review is probably indispensable in connection with company acquisitions and sales and has long since established itself as the market standard in the run-up to M&A transactions. However, due diligence reviews are also a regular occurrence in other areas of law – including real estate transactions. A recent decision by the BGH deals with the seller’s obligation to provide information if he offers a data room to carry out a due diligence review as part of a real estate transaction. Conclusions for M&A transactions could also be derived from this decision.
In its ruling dated 6 September 2023, case reference: I R 16/21, the Federal Fiscal Court (BFH) decided that the participation threshold of 10 % under § 8b para. 4 sentence 6 German Corporation Tax Act (KStG) can also be reached if several sellers are involved in the acquisition transaction. Accordingly, it depends on the existence of an economically uniform acquisition transaction.
On 12 January 2024, the Federal Constitutional Court (BVerfG) published its long-awaited decision of 28 November 2023 (case no. 2 BvL 8/13), in which it declared the provision of § 6 para. 5 sentence 3 EStG (German Income Tax Act) to be partially incompatible with the general principle of equality under Art. 3 para. 1 of the German Constitutional Law, i.e. to the extent that a transfer of assets between sister partnerships with identical shareholdings at book value is excluded. The decision provides a certain degree of legal certainty in practice, but does not answer all open questions regarding the transfer of book values between partnerships with identical shareholdings.