Under German law, the waiver of a debt by a creditor results in a taxable profit for the debtor. The German Ministry of Finance (“MoF”) had, however, issued a decree which nonetheless allowed such profits to be exempted from taxation. In a decision published on February 8, 2017 the German Federal Tax Court (“BFH”) held that this ministerial decree constituted a breach of the principle of legality as the MoF was not authorized to grant the tax exemption without a legislative basis. This landmark ruling will have far-reaching effects for all businesses which are on the verge of insolvency.

For complete article click here.