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Tax increases to gains from sale of portfolio shares

  • Germany
  • Tax planning and consultancy
  • Tax planning and consultancy - Briefings


The German government proposed that the gain from sale of portfolio shares by companies will fully become subject to corporate income tax and if applicable, also to trade tax.

Currently, if a company gains from the sale of shares in another company (irrespective of the size of the shareholding), it is exempt from corporate income tax and if applicable, also trade tax by 95% (except for short term trading in shares). This broad exemption would no longer be applicable to the gain from sale of portfolio shares. This increased tax burden would apply to all sales of portfolio shares from 1 January 2018. Portfolio shares are all shares held by a company in another company where the entire shareholding is less than 10%.

A corresponding taxation of dividends from portfolio shares was introduced on 1 March 2013 (ie such dividends are no longer exempt for 95% from corporate income tax).

The rules also are relevant to partnerships.  Shares in a company that are legally owned by a partnership will be allocated to the partners in accordance with their interest. For example, a partnership that holds 50% of the shares in a company and has six partners with equal interests in the partnership creates portfolio shares for the partners. The partnership is transparent and the partners will be taxed as if holding 1/6 of the shares in the company (less than 10% per partner).

As a result of the proposal, investment structures should be reviewed in order to identify possible solutions as to how the proposed increase of tax could be avoided or mitigated.