Federal Fiscal Court: Future insolvency administrator’s remuneration may be recognized as provisions

Background: statutory accounts vs. tax accounts

• Statutory accounts: If a company is in insolvency, the general accounting and valuation principles under German commercial law continue to apply during the insolvency and are not superseded by specific provisions of the Insolvency Code (see IDW RH HFA 1.012, no. 34). Consequently, where an insolvency administrator has rendered services eligible for remuneration up to the balance sheet date, commercial law literature assumes that there is an outstanding obligation to the insolvency administrator, for which a provision must be recognized (Schubert, in: Beck’scher Bilanz-Kommentar, 15th ed. 2026, § 249 HGB, no. 130 Insolvency Administrator’s Remuneration). The amount of the provision for work performed up to the relevant balance sheet date must be determined by means of a reasonable estimate (Oser/Wirtz, StuB 2025, 7).

• Tax accounts: In its judgment of September 19, 2022 (5 K 1800/19), however, the Fiscal Court Rhineland-Palatinate concluded that it should be decisive when the legal obligation for the insolvency administrator’s remuneration arises. This only occurs upon the future completion of the insolvency proceedings, meaning that—in the absence of an economic cause—no provisions for insolvency administrator’s remuneration may be recognized on the balance sheet for tax purposes. 

Contrary to the view of the Fiscal Court Rhineland-Palatinate, the BFH has now ruled in favor of the insolvent debtor in the appeal proceeding (judgment of June 25, 2026 – III R 35/23). 

Facts of the case

Standard insolvency proceedings were opened in 2015 in respect of the assets of an entrepreneur (liquefied gas transport). In the 2016 and 2017 balance sheets, the insolvency administrator recognized provisions on behalf of the insolvent debtor for his future remuneration. He recognized a provision only to the extent that the remuneration related to the business sphere. To determine the allocation, the insolvency administrator used the ratio of the business assets to private assets to be realized.

Decision of the Federal Fiscal Court

The BFH set aside the first-instance judgment of the Fiscal Court Rhineland-Palatinate and referred the case back for outstanding fact finding. However, the court answered the fundamental questions clearly in favor of the insolvency debtor:

• The BFH makes it clear that the insolvency administrator’s claim to remuneration arises economically as soon as the work is actually performed, and not only upon the conclusion of the proceedings.
• Consequently, in the years in question, the insolvency administrator’s claim for remuneration constituted an economically caused liability that was uncertain only as to its amount and that the debtor could seriously expect to be called upon to settle. 
• Insofar as the insolvent debtor determines his profit by means of a business assets comparison (Betriebsvermögensvergleich) in the years in question, i.e., is obliged to prepare financial statements, he would be required to recognize a provision for the remuneration claim. This remains to be established by the Fiscal Court Rhineland-Palatinate, to which the case has been referred back.
• The fact that private debts are also being settled in the insolvency proceedings does not preclude a business-related cause. The BFH sees no objection to determining the business-related portion of the insolvency administrator’s remuneration based on the ratio of business and private liabilities filed in the insolvency schedule (Insolvenztabelle).

Practical implications

The BFH's reasoning is convincing. It is consistent with the tax accounting principles for recognizing provisions, under which the test is whether the obligation was economically caused before the balance sheet date and whether it is probable that the reporting entity will be called upon to settle it after the balance sheet date. In doing so, the BFH provides clarity and legal certainty in two respects. 

Firstly, it treats the recognition of future insolvency administrator’s remuneration in the same way as comparable cases where the legal obligation only arises in the future (e.g., provisions for the retention of business records). Secondly, it eliminates the discrepancy between the tax accounting treatment of provisions for insolvency administrators’ remuneration and its treatment in the statutory accounts.