New Tax Law Developments For Pension Commitments

During the past months, the German Federal Tax Court (Bundesfinanzhof ; BFH) had several occasions to comment on individual issues connected with the accounting of provisions in the context of asset transactions between companies. This relates to the fact that German law does not offer much flexibility to simply agree which party keeps or assumes pension or anniversary liabilities. Normally these just follow the business as far as active employees are concerned, whereas liabilities relating to retired employees remain with the seller of the assets. From the perspective of the transferring company, these rulings provide opportunities. Thus, tax effects may be planned and realized by means of transfers within a group, which enable the neutralization of nonrecurring income by nonrecurring expenses.