L 23526 Official Journal of the European Union 10.9.2011 COMMISSION DECISION of 26 January 2011 on State aid C 7/10 (ex CP 250/09 and NN 5/10) implemented by Germany — Scheme for the carry- forward of tax losses in the case of restructuring of companies in difficulty (Sanierungsklausel) (notified under document C(2011) 275) (Only the German text is authentic) (Text with EEA relevance) (2011/527[EU) THE EUROPEAN COMMISSION, Having regard to the Treaty on European Union and to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof (1), Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof, Having called on interested parties to submit their comments pursuant to the provisions cited above (?), submitted further information on 2 July 2010. The Commission did not receive any comments from interested parties. 2. DESCRIPTION OF THE MEASURE 2.1. Background Corporate taxation in Germany is based mainly on the Income Tax Act (Einkommensteuergesetz, hereinafter: EStG) and the KStG. §10d(2) EStG allows losses incurred in a tax year to be carried forward, ie. according to the ability-to-pay principle, taxable income in future tax years may be reduced by setting off the losses up to a Whereas: maximum of EUR 1 million each year. Under §8(1) KStG, this possibility to carry forward losses also applies to entities subject to corporate income tax. 1. PROCEDURE (1) By letters dated 5 August 2009 and 30 September 2009 the Commission asked Germany for information about §8c Corporate Income Tax Act (Korperschaftsteuergesetz, hereinafter: KStG). The German authorities replied to these requests by letters dated 20 August 2009 and 5 November 2009. By decision of 24 February 2010, the Commission opened the formal investigation procedure in respect of the aid laid down in Article 108(2) of the Treaty on the Functioning of the European Union (TFEU). The possibility of carry-forward of losses resulted in trade in empty-shell companies (Mantelgesellschaften), which had long ceased any economic activity but still retained losses that had been carried forward. To counteract the trade in empty-shell companies, in 1997 the German legislator restricted the possibility of carrying forward losses by introducing in §8(4) KStG the shell acquisition rule (Mantelkaufregelung). The rule (2)  The Commission decision to initiate the procedure was restricted loss carry-forward to those corporate entities published in the Official Journal of the European Union (3). that were legally and economically identical to the The Commission invited interested parties to submit entity that incurred the losses. The rule does not comments. contain a definition of ‘economically identical, but gives one negative and two positive examples: (3)  The German authorities submitted their reply by letter dated 9 April 2010. (@) a corporate entity is not economically identical if more than half of its shares are transferred and if (4)  Two meetings with the German authorities were held in the entity then continues its economic activity or Brussels on 9 April 2010 and 3 June 2010. Germany starts it again with predominantly new assets; (") With effect from 1 December 2009, Articles 87 and 88 of the EC Treaty became Articles 107 and 108, respectively, of the Treaty on the Functioning of the European Union (TFEU). The two sets of b provisions are, in substance, identical. For the purposes of this Decision, references to Articles 107 and 108 of the TFEU should be understood where appropriate as references to Articles 87 and 88, respectively, of the EC Treaty. () OJ C 90, 8.4.2010, p. 8. () See footnote 2. = a corporate entity is economically identical, however, if the injection of new assets is solely for the purpose of restructuring the loss-making entity and if the activity which gave rise to the unrelieved loss carry- forward continues on a comparable scale for the following five years;