The business tax “nested entity” privilege in the case of (qualified) share swaps – Prior ownership periods of the transferring legal entity are not taken into account

In its ruling of December 17, 2025 (I R 9/23), the Federal Fiscal Court (BFH) confirmed that, in the case of a (qualified) share exchange under § 21 of the German Reorganization Tax Act (UmwStG), the prior holding periods of the transferring legal entity are not taken into account for the application of the trade tax “nesting privilege” (§§ 8 No. 5, 9 No. 2a of the Trade Tax Act (GewStG)) are disregarded. Distributions made in the year of the contribution are therefore subject to trade tax in full for the acquiring legal entity. This article examines the Federal Fiscal Court’s key arguments and illustrates how this can be avoided in practice through appropriate structuring.