Germany changes gain calculations for part-paid partnership asset transfers

A change in administrative treatment

The letter follows the Federal Fiscal Court’s 11 December 2025 judgment, IV R 17/23. The court rejected allocating book value proportionately by reference to market value. Within the relevant partnership-transfer rules, book value is instead allocated to the paid element up to the amount of consideration; a payment below book value therefore does not itself trigger a gain.^[3]

The Ministry replaces paragraphs 15 and 38 of its 8 December 2011 letter and withdraws its 12 September 2013 letter. Non-equity consideration, including assumed debt, exposes hidden reserves only insofar as it exceeds book value. Its example produces a €2,000 gain where a partnership assumes €3,000 debt on an asset with €1,000 book value.^[1]

The statutory perimeter remains important

Section 6(5) of the Income Tax Act governs specified transfers involving partners’ business assets, special business assets and partnership property. Book-value treatment requires preservation of Germany’s taxation of hidden reserves. The provision also contains subsequent-disposal restrictions and separate rules where a corporate interest in an asset is created or increased. This is not a general exemption for group asset sales.^[2]

Open cases and an irrevocable election

The guidance applies to all open cases. For transfers before 19 February 2026, transferor and transferee can jointly and irrevocably request the former strict approach from the transferor’s competent tax office. The letter also denies a transfer loss where market value is below book value and consideration remains below market value; a fully paid market-value sale is distinguished.^[1]

Our practical reading is that multinational groups using German partnerships should review asset-by-asset consideration and debt assumptions, rather than treating all restructuring payments alike. The court expressly distinguishes individual-asset transfers from whole-business transfers and private assets. The statutory corporate-interest and retention conditions still require a separate check before treating an internal movement as tax-neutral.^[2][3]