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The German 1997 Annual Tax Act
The German 1997 Annual Tax Act (Jahressteuergesetz 1997) was enacted into law in December of 1996 and has since entered into force. Most, but not all, of its provisions take effect on 1 January 1997. Please note that this article is one of a 14-part set of articles describing the 1997 Annual Tax Act.
V. TAX REORGANISATION ACT
Section 18 par. 4 UmwStG stated in its previous form that gain on the sale or liquidation of the business of a partnership or of an individual was subject to trade tax if the event occurs within five years of a (tax free) reorganisation involving the transfer of property from a corporation to the partnership or to the individual or involving a change in legal form from a corporation or a cooperative into a partnership. The provision has now been modified to provide that the same applies if merely a branch of activity (Teilbetrieb) of the partnership or individual is sold or liquidated within the five-year period. Furthermore, when a partnership is the receiving or emerging entity, the gain on sale or surrender of an interest in the partnership within five years will also be subject to trade tax.
Concerning the change in sec. 21 par. 2 sent 1 no. 3 UmwStG involving distributions from EK 04 with respect to so-called contribution-generated shares, we refer to section 1.7 in article no.1 (Income Tax) of this set of articles.
This article is one of a 14-part set of articles entitled "The German 1997 Annual Tax Act" in which we have endeavoured to provide a useful overview of what we consider to be the major changes made in the German laws by the 1997 Annual Tax Act and, more selectively, by other recent legislation. To access the other articles in the set please enter 'The German 1997 Annual Tax Act', 'KPMG Tax Advisers' and 'Business Monitor'. We are of course at your disposal to discuss in depth the ramifications of new provisions which are of particular interest to you.
Disclaimer and Copyright
This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. We in particular insist that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While our articles are carefully reviewed, we can accept no responsibility in the event of any inaccuracy or omission. Please note the date of each article and that subsequent related developments are not necessarily reported on in later articles. Any claims nevertheless raised on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Deutsche Treuhand-Gesellschaft AG (KPMG Germany). Distribution to third persons is prohibited without our express written consent in advance.
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