108. Accruals On Executory Contracts

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As reported in article no. 80, the tax laws have been changed effective for fiscal years ending from 1997 onwards to preclude the establishment of accruals with respect to obligations out of contracts in the course of performance (schwebende Vertraege = executory or ongoing contracts - new sec. 5 (4a) EStG). Accruals already in place for prior years must be reversed over a six year period (minimum of 25 % in 1997 and 15 % each in the succeeding five fiscal years).

Because of this change in the law, the impact of a significant recent ruling by an en banc panel (Grosser Senat) of judges on Germany's highest tax court will be limited to tax years through 1996.