FG Münster on the retroactive application of § 24(2) UmwStG
The Finanzgericht Münster (FG Münster, Münster Tax Court) has addressed the question of whether the version of § 24 Abs. 2 UmwStG (German Reorganization Tax Act) amended by the Steueränderungsgesetz 2015 (2015 Tax Amendment Act) may be applied retroactively to a contribution agreement already concluded in 2015. In the result, the court dismissed the action. Leave to appeal on points of law was granted, and the appeal is pending before the Bundesfinanzhof (BFH, Federal Fiscal Court) under case number X R 1/26.
The decision was issued on 15.12.2025 not as a judgment, but as a court notice pursuant to § 90a FGO (Fiscal Court Code). The Senate referred in this respect to streamlining the proceedings. The subject matter was income tax and the trade tax assessment amount for the disputed year 2014 in the case of jointly assessed spouses.
Contribution of a sole proprietorship to a GmbH & Co. KG
Notarial agreement dated 26.02.2015
The proceedings concerned the hive-down of a sole proprietorship to a GmbH & Co. KG. The notarial agreement was concluded on 26.02.2015. The contribution was made with tax retroactive effect to 30.06.2014.
A one-half undivided co-ownership interest in a property was not transferred together with the business. The claimant was the sole limited partner of the acquiring KG. At the same time, he was the sole shareholder and managing director of the general partner GmbH, which held a 0% interest in the assets.
Requested continuation of book values and other consideration
The claimant sought a continuation of the book values for the transferred business assets. The Finanzamt (tax office) rejected this. It relied on the fact that the requirements of § 24 Abs. 2 UmwStG in the version of 06.11.2015 were not met.
As consideration, the claimant’s limited partner capital account was increased by only EUR 500, from EUR 1,000 to EUR 1,500. The value of the transferred net assets exceeding this amount was credited to his loan account with the KG. The tax authorities regarded this loan credit as harmful other consideration.
Dispute over genuine retroactivity of the 2015 Tax Amendment Act
Application provision of § 27 Abs. 14 UmwStG
Under § 27 Abs. 14 UmwStG, § 24 Abs. 2 UmwStG in the version of 06.11.2015 is to be applied for the first time to cases in which the contribution agreement was concluded after 31.12.2014. Since the agreement in the disputed case was dated 26.02.2015, the transitional provision also covered this transaction in the opinion of the tax office.
The order for retroactive application under § 27 Abs. 14 UmwStG does not concern only § 24 Abs. 2 UmwStG. It also relates to further provisions of the Umwandlungssteuergesetz (UmwStG, German Reorganization Tax Act), namely § 20 Abs. 2, § 21 Abs. 1 and § 22 Abs. 1 Satz 6 Nr. 2, 4 and 5 UmwStG. Thus, clarification by the highest court may also become significant for contribution transactions involving corporations.
Claimants’ objections to retroactivity
The claimants opposed the retroactive application of the new rule. A central argument was that a fully drafted bill had not been introduced into the Bundestag (German Federal Parliament) until 27.03.2015 and thus after conclusion of the contribution agreement.
In their view, a mere protocol declaration in the Bundesrat (German Federal Council) could not move the point from which protection of legitimate expectations ceased to an earlier date. They also relied on the decision of the Bundesverfassungsgericht (Federal Constitutional Court) of 25.03.2021 – 2 BvL 1/11, which they considered comparable to the disputed case.
Court notice: action dismissed, leave to appeal granted
Operative part of the FG Münster decision
FG Münster followed the view of the tax office. The operative part of the court notice reads:
- The action is dismissed.
- The claimants shall bear the costs of the proceedings.
- Leave to appeal on points of law is granted.
The initially joined proceedings of the claimant regarding the trade tax assessment amount for 2014 were severed by order of 05.11.2025 following withdrawal of the action and discontinued under case number 2 K 25515/25.
Reasoning on the permissibility of genuine retroactivity
The court assumed that the legislature had amended § 24 Abs. 2 UmwStG retroactively by means of the 2015 Tax Amendment Act. FG Münster regarded this genuine retroactivity as justified by way of exception in the disputed case.
In the court’s opinion, the claimants could not rely on circumstances giving rise to legitimate expectations worthy of protection. For the Senate, the decisive factor was that the Bundesregierung (Federal Government) and Bundesrat had already expressed their intention before conclusion of the notarial agreement to change the systemically inconsistent legal position that had existed following the change in BFH case law in September 2013.
Classification of the decision for contribution transactions
Distinction from earlier taxation practice
FG Münster focused on the fact that the contribution of a business unit in exchange for other consideration had been treated differently over a long period. The court linked the protectability of reliance on the continued existence of the legal position that had meanwhile arisen to the declaration of intent by the constitutional organs entitled to initiate legislation, the Federal Government and the Bundesrat.
The decision therefore does not merely concern the technical application of a transitional provision. Rather, the focus is on the constitutional question of the circumstances under which a retroactive tax burden must be accepted despite a structuring transaction already having been completed.
Practical tax consequence in the disputed case
According to the decision, hidden reserves must be disclosed and taxed as current profit. The background is that the other consideration exceeds the threshold of 25% of the book value or EUR 500,000.
The decision of FG Münster has not yet been finally confirmed by the highest court. The appeal proceedings before the Bundesfinanzhof are listed as pending. The appellant is the taxpayer; leave to appeal on points of law was granted by FG Münster.
Appeal pending before the Bundesfinanzhof
The proceedings are pending before the BFH under case number X R 1/26. FG Münster lists the matter in its official overview of appeal proceedings under the topic “Constitutionality of the retroactive application of § 24 Abs. 2 UmwStG in the version applicable from 06.11.2015”.
A final decision by the Bundesfinanzhof remains to be awaited. Until then, it should be noted that the court notice of FG Münster reflects the view of the court of first instance and that the constitutional classification of the retroactive effect is still the subject of the appeal proceedings.
Frequently Asked Questions
FG Münster § 24 Abs. 2 UmwStG retroactive application permissible?
FG Münster considered the retroactive application of § 24 Abs. 2 UmwStG in the version of 06.11.2015 to be permissible in the case decided. However, the appeal is pending before the BFH under case number X R 1/26.
What were the facts in the contribution of the sole proprietorship to the GmbH & Co. KG?
A sole proprietorship was contributed to a GmbH & Co. KG by notarial agreement dated 26.02.2015 with tax retroactive effect to 30.06.2014. In addition to a small increase in the limited partner capital account, the excess value was credited to the claimant’s loan account.
What consequences does the FG Münster court notice on hidden reserves have for companies?
In the disputed case, the decision means that hidden reserves must be disclosed and taxed as current profit. The reason is that the threshold for other consideration under § 24 Abs. 2 UmwStG is exceeded.
Carefully classify tax structuring and ongoing proceedings
Contribution transactions under the Umwandlungssteuergesetz can trigger significant tax consequences, particularly where other consideration is granted in addition to partnership or shareholder rights. The appeal pending before the BFH shows that the constitutional assessment of the retroactive application of § 24 Abs. 2 UmwStG remains significant. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth private individuals on tax law issues in connection with restructurings and contributions. Further information can be found at Legal advice in tax law.
