EC OPENS FORMAL INVESTIGATION ON GERMAN LOSS CARRYFORWARDS FOR AILING COMPANIES UNDER STATE AID RULES

The EC has opened a formal investigation into the restructuring exception in section 8c of Germany's Corporate Income Tax Code, which grants a tax benefit to ailing companies when there is a significant change in ownership. The EC is concerned that the restructuring exception might confer a selective advantage on certain undertakings that cannot be justified by the nature and general scheme of the German tax system because, while both ailing and healthy companies could be loss making, only ailing companies are allowed to retain loss carryforwards after a harmful share transfer.