The situation
A planned acquisition of 60% of a group with tax losses in three countries
A private equity fund in Munich is buying 60% of a software group: a German parent with €3.2m of tax losses, an Austrian subsidiary in Graz with €900k and a Dutch subsidiary in Utrecht with €1.5m. The fund’s model assumes the losses can be used. Its lawyers ask your firm to confirm that before signing.
Each country has a different trigger and different exceptions. The hours go on testing the deal against each rule, including the indirect change at the subsidiaries, and on the case law that decides how the exceptions are read. The memo then has to tell the fund what it can rely on and what it cannot.
What the research has to settle
The rules behind the answer
- Germany looks at the shares transferred
- German law forfeits a corporation’s unused losses where more than half of its shares pass, directly or indirectly, to one acquirer or a group acting together within five years. Exceptions cover intra-group restructurings and taxable hidden reserves, and an application can keep losses where the business continues unchanged.
- The partial forfeiture rule is gone
- The former rule forfeiting losses in proportion to a transfer of more than a quarter and up to half of the shares was held unconstitutional and has been removed. Smaller transfers no longer forfeit losses under the German rule.
- The Netherlands and Austria use other tests
- Dutch law restricts losses after a change in ultimate ownership, with a lower trigger than Germany’s and exceptions tied to the activities carried on. Austrian law forfeits losses where the company loses its identity, looking at changes in shareholders, management and the business together.
- Surviving losses still have limits
- Germany, the Netherlands and Austria each limit how much of a year’s profit carried-forward losses can offset, in different ways. The fund’s model should reflect the cap in each country, not only whether the losses survive.
How it runs in azta
From the question to the document
The question, as you would type it
Fund acquires 60% of a German GmbH that owns 100% of an Austrian GmbH and a Dutch BV, all with tax losses. No change of business planned for two years. Which losses are forfeited in each country, which exceptions could apply, and what conditions keep them?
You start with
A planned acquisition of 60% of a group with tax losses in three countries
- 01
Describe the deal and the group
Set out the shareholdings before and after, the subsidiaries and the losses. azta searches the German, Austrian and Dutch corporate tax acts for each entity.
Cited research· Free - 02
Find the decisions on the exceptions
Ask how the courts have read the hidden-reserves and continuation exceptions and the Austrian identity test. azta searches published case law, including the German Federal Fiscal Court, with links to the full text.
Case-law search - 03
Test the indirect change
Ask how the acquisition of the parent affects the Graz and Utrecht subsidiaries under each country’s rule. Each answer cites the provision it applies.
Cited research· Free - 04
Write the memo
Ask for a memo per entity: trigger, exceptions, conditions to keep and the annual cap. Edit it in Canvas for the fund’s lawyers.
Canvas · Ask azta· Pro You send
A memo on loss forfeiture per entity, with the exceptions and what preserves them
What you get
A memo on loss forfeiture per entity, with the exceptions and what preserves them
Memo · draft
Project Kestrel: tax losses after the acquisition
Germany. The fund acquires more than half of the parent’s shares, so the parent’s losses are forfeited unless an exception applies. The intra-group exception does not fit an acquisition by a third party. The hidden-reserves exception and the application to continue the business are examined in sections 2.2 and 2.3.
Austria. A change of shareholders alone does not forfeit the Graz company’s losses. Forfeiture requires that change to come together with substantial changes to the business and the management. The fund’s plan to keep both unchanged should be recorded in the deal documents.
Netherlands. The change in ultimate ownership exceeds the Dutch trigger. Whether the Utrecht company’s losses survive depends on the exceptions for companies with continuing business activities, set out in section 4 with the decisions on them.
Outcomes on your numbers
What azta is worth on this task
Pro pays for itself after
9 minutes a month
At €180 an hour, that is all the time Pro (€27 a month) has to take off your desk to cover its price.
Example figures. Replace them with your own.
- Hours back a year
- 32
- Capacity at your rate
- €5,832
- More loss memos on share deals a quarter
- 0.8
- Return on Pro
- 18×
- Research
- Drafting
- Your review
A scenario you set, not a promise. The hours that come back go to another client, or deeper into this one.
Want these numbers on your team’s real workload?
Book a demoSources azta searches here
- Gesetze im Internet
- Rechtsprechung im Internet
- RIS
- wetten.overheid.nl
- Rechtspraak.nl
What stays with you
- The hidden-reserves valuation, which needs the numbers.
- Confirming the buyer’s post-deal plans for the business.
- The view in the memo and the sign-off.
Frequently asked questions
- Can azta model how much of the losses can be used?
- No. It researches the rules and drafts the memo. The calculations stay with you and the deal model.
- Does it find the decisions on the exceptions?
- Yes. It searches published case law, including the German Federal Fiscal Court, and links each decision to its full text.
- Can I check the rule as it stood at an earlier date?
- Yes. Ask about the law at a past date, for example the date of an earlier share transfer, and azta cites the version then in force.
