Reed Smith Client Alerts

In December 2016 the German Federal Fiscal Court decided that debt restructuring gains of non-German real estate companies with German properties are not subject to German taxation. This provides investors the possibility to restructure distressed real estate portfolios without a German tax exposure.
Unfortunately, since November 2016, debt restructurings of companies that are tax resident in Germany have become uncertain from a tax perspective as the Federal Fiscal Court dismissed the German tax authorities’ taxpayer-friendly decree on the cancelation of debt income. A legislative process to pass a new law has been initiated, but debt restructurings so far remain subject to legal uncertainty where restructuring gains arise.