In its decision of October 2, 2025 (case no. IV R 14/25), the German Federal Fiscal Court (BFH) commented on the effective book value application pursuant to Section 3 (2) of the German Transformation Tax Act (UmwStG). It confirmed its case law according to which this book value application can be made in the notarial deed on the conversion, a certified copy of which the notary sends to the competent tax office in accordance with Section 54 (1) EStDV.

Section 3 (2) UmwStG does not specify how the application for the valuation of assets at book value or an intermediate value is to be made. According to sentence 2 UmwStG, the application must be submitted to the tax office responsible for the taxation of the transferring corporation no later than the date of the first submission of the final tax balance sheet. It follows from this clear wording of the law that the application must be submitted by the transferring corporation (or by the acquiring legal entity as the legal successor). The lack of legal specificity regarding the form of the book value application carries the risk in practice that either a book value application as such will not be recognized or that a statement by the parties will be considered a valid book value application, which may mean that a decision is made too early and the option to choose the valuation method is thus “used up.”

In its current decision, the German Federal Fiscal Court states the following regarding the exercise of the book value application:

  • In the absence of legal requirements, the book value application pursuant to Section 3 (2) UmwStG is not subject to any formal requirements and can therefore be submitted without any formal requirements.
  • Contrary to the plaintiff's view in the case in dispute, it is not necessary for an effective book value application within the meaning of Section 3 (2) UmwStG that the assets are actually stated at book value in the final tax balance sheet. The only decisive factor is that the application is submitted in good time. This is also provided for in the Transformation Tax Decree of the German Federal Ministry of Finance from January 2, 2025, in margin number 3.29.
  • The agreements between the parties in the (notarized) conversion agreement cannot generally be understood as an application within the meaning of Section 3 (2) sentence 1 UmwStG, as there is no declaration by the transferring company to the tax office. However, this does not apply if the notarized deed, a certified copy of which the notary sends to the tax office (Section 54 (1) EStDV), expressly contains an “application clause,” i.e., an application addressed to the tax office for book value or interim value to be applied. This may constitute a valid application within the meaning of Section 3 (2) UmwStG. 
  • In the case in dispute, the notarized merger resolutions contained corresponding application clauses: "The merger shall be carried out in accordance with § 3 (2) UmwStG at the tax book values attributable to the assets and liabilities of [H GmbH] as of December 30, 2009, 12:00 a.m. (= tax transfer date). All business assets used in the operation of 
    [H GmbH] will be transferred to [the plaintiff] at book values based on the merger balance sheet of [H GmbH] in accordance with the provisions of the German Transformation Tax Act. The application for book value transfer is hereby submitted."
  • The BFH also states that each balance sheet used as a basis for taxation is to be regarded as a closing balance sheet. This must be taken into account in practice, as the commercial balance sheet, including the reconciliation statement, can therefore also lead to the exercise of the valuation option.
  • Finally, the BFH confirms the opinion of the tax authorities (Transformation Tax Decree of October 2, 2025, margin number 3.29) that the first closing balance sheet submitted to the tax office in which the tax book values are carried forward constitutes an implied book value application, unless an explicit application has been submitted beforehand.

Notice:

In practice, it is very important that the option to choose the valuation method is exercised consciously (continuing to use book value is not always advantageous) and that a book value application is made clearly and unambiguously. A general “declaration of intent” in the notarial deed is not sufficient. On the other hand, it is also questionable whether an explicit book value application in the notarial conversion deed is advisable, as this would mean that the valuation option has already been used up. It is advisable to submit an application to the tax office in writing/electronically.

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