Recognition of liabilities in insolvency proceedings: legal certainty regarding claims not filed with the insolvency schedule

Summary

In the case at hand, Z company, which was an indirect shareholder of a GmbH (a German limited liability company), had given two loans to that GmbH. In 2009, insolvency proceedings were opened over the assets of the GmbH on the grounds of illiquidity and over-indebtedness. Z company initially filed its loan receivables with the insolvency schedule.

During judicial litigation, the insolvency administrator and Z company entered into a settlement in 2014, under which Z company undertook to "withdraw" the claims filed with the insolvency schedule and to cease asserting them in the insolvency proceedings. In return, the insolvency administrator waived an insolvency avoidance claim (Insolvenzanfechtungsanspruch) against Z company. The insolvency administrator subsequently derecognized the loan liability in the tax balance sheet as at the 2014 balance sheet date with income-increasing effect but treated the resulting amount as tax-exempt income in the corporate income tax return. The tax office confirmed the profit-affecting derecognition of the liability but classified the resulting gain as taxable, on the basis that no applicable tax exemption was available. Following an unsuccessful administrative appeal (Einspruchsverfahren), the insolvency administrator filed a claim before the Münster Tax Court, which held that the mere withdrawal of a claim from the insolvency schedule does not give rise to a prohibition on recognising the liability.

The tax office's appeal was dismissed as unfounded by the BFH in its judgment of 21 April 2026 – IX R 34/24. The BFH stated that a liability that exists under civil law regularly constitutes an economic burden and thus justifies the recognition of that liability on the balance sheet. An economic burden is absent only where it can be established with a probability bordering on certainty that the creditor will no longer assert the claim. 

The BFH found that an agreement not to assert a claim in insolvency proceedings does not constitute a de facto waiver of the claim, but merely a standstill agreement (Stillhalteabkommen) comparable to a deferral (Stundung). Such an arrangement does not – even in light of the GmbH's poor financial condition – result in it being possible to conclude with utmost probability that the claim will no longer be asserted. Accordingly, an income-increasing derecognition of the liability was precluded.

In addition, the BFH affirmed its established case law principles regarding the tax balance sheet treatment of subordinated debt (Rangrücktritte) in the context of court-approved settlements. Pursuant to these principles, a subordination does not trigger a prohibition on recognising a liability under Sec. 5 para. 2a German Income Tax Act (Einkommensteuergesetz) where satisfaction of the liability from assets not subject to the insolvency (insolvenzfreies Vermögen) remains permissible.

Practical implications

The BFH confirms that a liability is to be derecognized by the debtor only where it can be proven with reasonable certainty that the creditor will no longer assert the claim. This threshold is generally met only upon the actual extinguishment of the obligation, for example by fulfilment of debt or waiver. An undertaking not to assert claims in insolvency proceedings, as well as the mere non-filing of claims with the insolvency schedule, does however not suffice and not constitute an implied waiver of the claim. Equally, the debtor's distressed financial condition or even illiquidity alone should not affect the recognition of the liability.

This legal view is also consistent with the principles set out in the circular issued by the Frankfurt Regional Tax Office of July 26, 2021 (OFD Frankfurt S 2743 A-12-St 523) and with the prevailing view in German tax literature (see, among many, Micker, in: Herrmann/Heuer/Raupach, EStG KStG, Commentary, Sec. 11 Corporate Income Tax Act, 304th edition, 6/2021, recital 44 with further references). According to this view, a creditor's mere consent to the liquidation of the debtor company does not constitute an implied waiver of the claim, since an economic burden arising from the liability must still be assumed to exist for the debtor. These principles are relevant not only in insolvency or liquidation scenarios but equally for pre-insolvency restructurings under the German Corporate Stabilisation and Restructuring Act (Unternehmensstabilisierungs- und -restrukturierungsgesetz (StaRUG)) and, more broadly, for intra-group restructurings. 

It should be noted, however, that the judgment concerned only the debtor's side; the creditor must be considered separately.  On the creditor's side, no correspondence principle applies.  Where the debtor is in a distressed financial condition, an impairment of the claim – at least in the statutory accounts – may be required at the level of the creditor on the basis of the prudence principle. For tax accounting purposes, on the other hand, an optional write-down to the lower fair market value (Teilwertabschreibung, FMV) exists if the FMV of the claim is lower due to a presumably permanent impairment.