The tax-deductibility of unsecured convertible loans within the meaning of § 8b(3), sentence 7, of the German Corporate Income Tax Act (“escape clause”)

FG Münster, February 17, 2026 – 13K 905/24 K: Can an unsecured shareholder convertible loan satisfy the arm’s-length principle—and thereby avoid the addition under § 8b(3), sentence 4 of the German Corporate Income Tax Act (KStG)? The Münster Fiscal Court affirms this: If unrelated third parties have granted convertible loans under comparable terms during the same period, the escape clause of § 8b(3) sentence 7 KStG (new version) applies—even without collateral. This is a significant signal for practice, particularly for the startup and venture capital sectors. Since an appeal has been filed (BFH I R 4/26), relevant cases should be kept open for further proceedings.

Raphael Baumgartner and Bianca Disch summarize the facts underlying the decision and the reasons for the Tax Court’s ruling in their article.