071. Draft Directive On The Tax Reorganisation Act

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In April 1997, the Federal Ministry of Finance issued in draft form a highly detailed directive setting forth the position of the German tax authorities on numerous issues associated with the new tax reorganisation act which took effect on 1 January 1995. The draft directive is 179 pages in length and the subject of comments which KPMG Germany submitted to the Institute of German Accountants (IDW) at the end of May 1997. The Institute issued its own comments in early June.

The most controversial position taken by the tax authorities in the draft directive is that, when a corporation is merged into or otherwise reorganised as a partnership, any step-up in the value of the assets received by the partnership from the disappearing corporation will not apply for trade tax purposes. Instead, the draft directive states that a separate