Fiscal Court Of Münster Clarifies Relevant Date For Assessing A Contribution In Kind Under Section 20 (1) UmwStG

The Fiscal Court (Finanzgericht, FG) of Münster ruled on the relevant date for assessing a contribution in kind under section 20 (1) of the Reorganization Tax Act (Umwandlungssteuergesetz, UmwStG) (judgment of July 16, 2026, 8 K 1784/23 F). The issue in dispute concerned whether the contribution of a partnership interest (Mitunternehmeranteil) was possible at tax book values. 

Summary

The claimant contributed his limited partnership interest in a GmbH & Co. KG into a GmbH in exchange for new shares in the GmbH. On the same day, and by a notarial deed executed only moments earlier, he sold the production real estate belonging to his special business assets (Sonderbetriebsvermögen), disclosing the hidden reserves, with immediate effect to the receiving GmbH. For tax purposes, the contribution was given retroactive effect to December 31, 2016. The claimant sought to roll-over the tax book values under section 20 (2) sentence 2 UmwStG. 

The tax authority denied the roll-over of tax book values. Under ref. no. 20.10 in conjunction with ref. no. 20.06 and ref. no. 15.03 of the Reorganization Tax Decree (Umwandlungssteuererlass, UmwStE) of 2011 (identical in this respect to the UmwStE 2025), the circumstances as of the tax effective date (steuerlicher Übertragungsstichtag) were said to be decisive; on that date, the claimant still held functionally essential special business assets (funktional wesentliche Betriebsgrundlagen).

The FG granted the claim. The requirements for a contribution in kind within the meaning of section 20 (1) UmwStG—in particular, the transfer of all functionally essential business assets of the partnership interest in a single transaction (einheitlicher Vorgang)—must be assessed solely on the basis of the circumstances at the time the contribution agreement was actually concluded, and not on the basis of the circumstances as of the tax effective date within the meaning of section 20 (6) UmwStG (contrary to ref. no. 20.10 in conjunction with ref. no. 20.06 and ref. no. 15.03 UmwStE).

At that time, the claimant had not (anymore) retained any functionally essential business asset. The retroactive tax effect under section 20 (5) and (6) UmwStG concerns exclusively the legal-consequences side (the determination of income and business assets) and may not be included in the examination of the substantive requirements of section 20 (1) UmwStG.

Furthermore, the principles of the judgment of the Federal Tax Court (Bundesfinanzhof, BFH) of November 9, 2011 (X R 60/09) regarding section 24 (1) UmwStG also apply within the scope of section 20 UmwStG.

The disposal, prior to the contribution, of a functionally essential business asset belonging to a co-entrepreneur’s special business assets, with disclosure of hidden reserves, to the receiving company does not preclude the assumption of a tax-preferential contribution in kind, provided that the disposal is intended to be permanent. Neither section 42 of the Fiscal Code (Abgabenordnung, AO) nor the case law on multi-step plans (Gesamtplanrechtsprechung) applies in this respect.

The FG allowed an appeal on points of law (Revision) on grounds of fundamental importance (section 115 (2) no. 1 of the Fiscal Court Procedure Code (Finanzgerichtsordnung, FGO))—case number X R 22/26.

Practical implications

In practice, the decision is of significant importance. The FG makes clear that the retroactive tax effect under section 20 (5) and (6) UmwStG concerns only the legal-consequences side and is not to be included in the examination of the substantive requirements of section 20 (1) UmwStG.

It follows that an aggregate of assets and liabilities (Sachgesamtheit) within the meaning of section 20 (1) UmwStG can still be established within the retroactive period, which significantly facilitates the tax-neutral implementation of commercially sensible restructurings.

In our view, the principles can also be applied to contributions of businesses and branches of activities (Teilbetriebe) under section 20 UmwStG, as well as to contributions under section 24 UmwStG. Generally, an application of the judgment’s principles should also be considered in connection with sections 15 and 16 UmwStG (in conjunction with section 2 UmwStG).

In this case the tax-relevant date would, in our opinion, be the date of the transfer and respectively, the requirement regarding the branches of activity would need to be met no later than as of the date of the demerger’s entry in the commercial register at the registered seat of the transferring company. The same should apply to a demerger by way of a hive-down, which is subject to sections 20 et seq. UmwStG.

In the case of demergers by way of split-up (Aufspaltung) and spin-off (Abspaltung), however, the anti-abuse rule of section 15 (2) sentence 1 UmwStG must be considered. Because the anti-abuse rule focuses on acquisitions and increases in partnership interests as a result of the transfer of assets, that do not constitute a branch of activity, within a three-year period before the tax effective date, this gives rise to inconsistencies that cast doubt on a comprehensive transferability of the judgment’s principles—at least in the case of partnership interests.

The decision is furthermore relevant to the examination of the counter-exception of section 8 (1) no. 9 of the Foreign Tax Act (Außensteuergesetz, AStG) in the context of the controlled foreign company taxation rules (Hinzurechnungsbesteuerung) for comparable foreign reorganization transactions.

It should be borne in mind that the tax authorities will likely continue to apply the administrative view laid down in the UmwStE. For practical purposes, the judgment of the FG Münster cannot therefore yet provide the desired planning certainty for the transfer of aggregates of assets and liabilities.

Equally relevant in practice is the application to section 20 UmwStG of the principles from the judgment of the BFH of November 9, 2011 (X R 60/09). The disposal, prior to the contribution, of a functionally essential business asset belonging to the special business assets does not preclude the roll-over of tax book values, provided that it is carried out with disclosure of the hidden reserves and is intended to be permanent.

Neither section 42 AO nor the case law on multi-step plans applies in this respect. For the structuring practice, this provides certainty: prior transfers to the receiving company are not per se harmful.

The clarification by the highest court remains open. The BFH most recently left expressly undecided the question of whether the aggregate of assets and liabilities must already exist as of the tax effective date (judgment of February 21, 2022, I R 13/19). The FG allowed an appeal on points of law on grounds of fundamental significance (section 115 (2) no. 1 FGO); the proceedings are pending under case number X R 22/26.

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