General Ruling of the Minister of Finance on the Qualification of Share Capital Increase in the Context of MDR Reporting

Scope of the ruling

The Minister of Finance indicated that, in practice, MDR-reported arrangements often concerned situations where an increase in share capital led to a reduction of the civil law transaction tax (PCC) liability – in particular through allocating part of the contribution to supplementary or reserve capital.

According to the ruling, while a tax benefit under the MDR provisions may arise from a capital contribution, the primary purpose of increasing capital is to strengthen the company’s financial standing, not to achieve a tax advantage. Therefore, as a rule, the main benefit test will not be met.

When MDR Reporting Obligation May Arise

However, the Minister of Finance emphasized that not every capital increase with share premium is automatically exempt from reporting. An arrangement may be considered reportable where:

• the share capital is increased by a cash contribution,
• the shareholders’ intention is to reduce the PCC tax base,
• there is no contractual or business justification for the transaction that provides clear non-tax benefits (e.g., an investment agreement or provisions of the articles of association).

If, however, the capital increase directly results from the investment terms or contractual arrangements between shareholders (e.g., the company’s articles allow greater flexibility in capital allocation), the main benefit test should not be deemed satisfied – hence, no reportable arrangement arises.

Implications for Taxpayers

The MDR reporting obligation may apply not only to large companies but also to entities linked to corporate groups where a company meets the statutory thresholds (e.g., exceeding EUR 10,000,000 in revenues, expenses, or assets, or a capital increase exceeding EUR 2,500,000).

This means that even smaller affiliated entities may fall within MDR reporting obligations when participating in such transactions.

Recommended Actions for Taxpayers

In light of the General Ruling, it is recommended to:

• review past and planned capital increases for potential MDR obligations,
• verify corporate documentation (investment agreements, resolutions, articles of association) for business justification,
• review MDR reporting procedures within corporate groups,
• consult tax advisors in case of doubts regarding the main benefit test.

The Forvis Mazars tax advisory team remains available to support your company in assessing the impact of the ruling and in handling potential MDR reporting obligations.