If there is a need in a company to avoid unfavorable taxation due to new conditions or to avoid negative tax consequences in anticipation of structural changes, there are opportunities to convert the existing legal forms into others in order to optimize the planned structure for tax purposes. Again, considerations should be made as early as possible in order to examine existing alternatives in detail and to weigh them against each other before any legally relevant changes in the law take effect.
This is particularly true in the run-up to a company acquisition and in connection with planned company succession. Often, legal forms are aimed at optimizing current taxation, but not in view of sudden changes that were not expected. Timely conversion of the legal form can avoid disadvantages.
Legislators have been trying for many years to strengthen and increase the competitiveness of companies in Germany by reducing their taxes and creating other favorable economic conditions. However, the different legal forms are still taxed differently, so it is worth structuring economic activities in such a way that the tax burden is as low as possible. There are various design alternatives that must be considered in tax planning, both with regard to current and nonperiodic taxation. The latter includes not only the effects of company sales or restructuring, mergers or divisions, but also the increasingly important taxation of succession and donations.
As part of systematic tax planning, these events must and can be incorporated into the design considerations at an early stage. In addition, as part of legal reforms, in particular corporate taxation, the chosen legal forms must be checked time and again to see whether the initial objective can still be achieved or if design adjustments are required.
These considerations also have an international dimension when, as is more common, companies are aligning their activities across the border.