By judgment of 2 April 2025, the Niedersächsisches Finanzgericht (Lower Saxony Fiscal Court) ruled on the application of § 22 Abs. 1 Satz 1 UmwStG (German Reorganization Tax Act) in the event of a lock-up period violation within the first year. The central issue was whether, in such a case, contribution gain I is to be taxed in full without the reliefs under § 16 Abs. 4 EStG (German Income Tax Act) and § 34 EStG, or whether § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG is to be teleologically reduced in this respect.
The court affirmed a teleological reduction for the case of an event harmful to the lock-up period occurring in the first year. At the same time, it clarified that the seven-year period under § 22 Abs. 1 Satz 1 UmwStG must be determined to the exact day pursuant to § 187 Abs. 1 and § 188 Abs. 2 BGB (German Civil Code). The decision is not final; the appeal on points of law is pending before the Bundesfinanzhof (BFH, Federal Fiscal Court) under case reference X R 14/25. No decision by the Bundesfinanzhof has yet been issued.
Background to the Proceedings before the Niedersächsisches Finanzgericht
Change of Legal Form of a Partnership Company into a GmbH
The plaintiffs were physicians from various specialties who converted their joint partnership company into a GmbH on 28 August 2019 by way of a change of legal form. For tax purposes, the conversion was treated as retroactive to 1 January 2019.
On the same day as the conversion resolution, the sale of all GmbH shares to an unrelated third party was agreed. The sale was to take effect as of 1 January 2020. Completion of the share purchase agreement was subject to the condition precedent that the competent admissions committee issue a final determination that the GmbH would continue all existing statutory health insurance physician seats and employment approvals.
Dispute over the Determination of Tax Bases for 2019
The subject matter of the proceedings before the fiscal court was a notice on the separate and uniform determination of tax bases for the year 2019. The plaintiffs had initially lodged an objection against this notice.
The tax office had determined contribution gain I, but reduced it by one seventh. At the same time, it denied the application of the reliefs under § 16 Abs. 4 EStG and § 34 EStG. In doing so, the tax authorities followed their previous position, according to which these reliefs do not apply to lock-up period violations under § 22 Abs. 1 Satz 1 UmwStG.
Legal Core Issue: Lock-up Period under § 22 Abs. 1 Satz 1 UmwStG
Contribution Gain I upon Disposal of Shares Subject to a Lock-up Period
§ 22 Abs. 1 Satz 1 UmwStG concerns, among other things, cases in which shares resulting from a contribution are disposed of within a seven-year lock-up period. In such constellations, contribution gain I may arise and must be recognized retroactively.
The Niedersächsisches Finanzgericht had to assess what consequences arise if the event harmful to the lock-up period occurs as early as the first year. This concerned not only the calculation of the lock-up period in terms of time, but also the question of whether the tax reliefs under § 16 Abs. 4 EStG and § 34 EStG are to be applied despite the wording of § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG.
Calculation of the Seven-Year Period to the Exact Day
The court held that the seven-year period under § 22 Abs. 1 Satz 1 UmwStG must be calculated to the exact day. The decisive provisions were the general rules on time limits in § 187 Abs. 1 BGB and § 188 Abs. 2 BGB.
Accordingly, a blanket year-based assessment is not decisive. Rather, the specific passage of time between the contribution and the later event is relevant for determining the lock-up period.
Teleological Reduction in the Event of a Violation in the First Year
Preferential Tax Treatment despite Lock-up Period Violation
In the opinion of the Niedersächsisches Finanzgericht, § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG is to be teleologically reduced in the event of a lock-up period violation within the first year. The court therefore concluded that the reliefs under § 16 Abs. 4 EStG and § 34 EStG may apply in this category of cases.
In its reasoning, the court relied on the fact that the sale for consideration of the shares subject to the lock-up period in the first year resulted in full taxation of the hidden reserves under the income tax regime. The court did not identify any abusive tax arrangement in the constellation decided.
No Avoidance of Hidden Reserves and No Change of Status
The Niedersächsisches Finanzgericht further stated that, in the event of a violation within the first year, neither an avoidance of the taxation of hidden reserves nor a change of status occurs. In this constellation, the tax effect corresponds to a contribution in kind at fair market value under § 20 Abs. 4 UmwStG.
In addition, the court took into account that, in the case of a change of legal form—unlike a contribution in the narrower sense—there is no change of legal entity and no change in the shareholder structure. Even taking into account the legislature’s power to typify, the court saw no substantive reasons for completely non-preferential taxation. It also based its assessment on the principle of equality.
No Reduction of Contribution Gain I by One Seventh
Decision in This Respect Contrary to the Original Calculation
The tax office had reduced contribution gain I by one seventh. The Niedersächsisches Finanzgericht did not follow this calculation.
According to the decision, contribution gain I was specifically not to be reduced by one seventh. In its reasoning, the court relied on the fact that no full year had yet elapsed between the date of contribution and the disposal. On this point, the decision therefore went against the calculation that provided for a reduction by one seventh.
Difference between Reduction and Preferential Rate Treatment
The decision distinguishes between two questions that must not be equated:
- whether contribution gain I is to be reduced pro rata due to the expiry of one year,
- whether the reliefs under § 16 Abs. 4 EStG and § 34 EStG are to be applied despite the lock-up period violation in the first year,
- whether § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG is to be teleologically reduced in this particular category of cases.
The Niedersächsisches Finanzgericht denied the reduction by one seventh, but affirmed the application of the reliefs under § 16 Abs. 4 EStG and § 34 EStG on the basis of teleological reduction.
Departure from the Previous Administrative View
Tax Authorities Have So Far Rejected Reliefs
The decision expressly departs from the previous view of the tax authorities. They consider the reliefs under § 16 Abs. 4 EStG and § 34 EStG not to be applicable in cases of lock-up period violations.
By contrast, the Niedersächsisches Finanzgericht adopted a different legal assessment for lock-up period violations within the first year. The scope of application of this decision must be related to the constellation addressed by the court and must not be transferred without further analysis to all lock-up period violations.
No Clarification by the Highest Court through the Bundesfinanzhof
The question of whether § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG is to be teleologically reduced in the event of violations within the first year has not yet been decided by the highest court. The Niedersächsisches Finanzgericht allowed the appeal on points of law due to the matter’s fundamental significance.
The appeal on points of law is pending before the Bundesfinanzhof under case reference X R 14/25. The judgment of the Niedersächsisches Finanzgericht is therefore not final. Until a decision by the Bundesfinanzhof is issued, the legal position on this point remains open.
Assessment of the Decision
State of Debate in Legal Literature
The Niedersächsisches Finanzgericht points out that the question of a teleological reduction of § 22 Abs. 1 Satz 1 UmwStG in cases of lock-up period violations in the first year is highly disputed in legal literature. This state of debate was precisely one reason for allowing the appeal on points of law.
At the same time, the court clarified that the case law of the Bundesfinanzhof on lock-up period violations under § 6 Abs. 5 Satz 6 EStG cannot be transferred to § 22 Abs. 1 Satz 1 UmwStG. The decision therefore concerns an independent issue of reorganization tax law.
Publication and Documentation of the Judgment
The judgment was made public by the Niedersächsisches Finanzgericht only in Newsletter 1/2026 of 21 January 2026, almost nine months after it was handed down. The decision is documented, among other references, under ECLI:DE::2025:0402.9K147.22.00 and in WKRS 2025, 29638.
For tax litigation practice, the decision is already being discussed with a view to comparable open cases. Specialist publishers refer in this respect to the pending appeal proceedings before the Bundesfinanzhof.
Frequently Asked Questions
What did the Niedersächsisches Finanzgericht decide on § 22 Abs. 1 Satz 1 UmwStG in the first year?
The Niedersächsisches Finanzgericht decided that § 22 Abs. 1 Satz 1 2. Halbsatz UmwStG is to be teleologically reduced in the event of a lock-up period violation within the first year. Accordingly, the reliefs under § 16 Abs. 4 EStG and § 34 EStG may apply in this constellation.
Is contribution gain I reduced by one seventh in the event of a lock-up period violation in the first year?
According to the decision of the Niedersächsisches Finanzgericht, contribution gain I is not to be reduced by one seventh if no full year has yet elapsed between the contribution and the disposal. The calculation of the time limit to the exact day is governed by § 187 Abs. 1 and § 188 Abs. 2 BGB.
What practical consequences does the BFH proceeding X R 14/25 on § 22 UmwStG have for companies?
The pending proceeding X R 14/25 may be significant for companies and shareholders where comparable conversion and disposal transactions within the first year are concerned. Since the judgment is not final, the definitive assessment depends on the decision of the Bundesfinanzhof.
Tax Assessment in Cases of Reorganizations and Lock-up Periods
The decision of the Niedersächsisches Finanzgericht concerns a narrowly defined question of reorganization tax law, but one that is significant for conversion transactions. It shows that the application of § 22 UmwStG in interaction with § 16 Abs. 4 EStG and § 34 EStG depends on the specific timing and structural design of the facts of the individual case. MTR Legal Rechtsanwälte supports companies, investors and high-net-worth individuals in tax law matters relating to restructurings, share disposals and ongoing fiscal court proceedings; further information can be found under Legal Advice in Tax Law.
