Ministry of Finance curbs private equity ambitions in tax consulting

A new draft law aims to put a stop to foreign avoidance structures for shareholdings. Existing investors must be prepared for more difficult exit conditions.

Regulatory shock after PE euphoria

The Federal Ministry of Finance is reacting to the latest private equity investments in the consulting sector with a draft law that is intended to close previous loopholes. While WTS has already gained EQT as a partner and Afileon started out fully PE-financed, politicians now want to pull the handbrake. The new Section 55g of the Tax Consultancy Act defines more clearly in future who may call themselves a tax consultancy firm. Only companies in which tax consultants and tax agents dominate both in terms of voting rights and management will be granted this authorization.

Bypass via Benelux companies is stopped

Until now, financial investors used a trick: they invested in companies in Luxembourg, the Netherlands or Belgium, where PE investments are permitted. These companies then invested in German tax consultancies - an indirect investment that circumvented the German ban on third-party ownership. BStBK President Hartmut Schwab had criticized precisely this legal loophole and called for improvements. His concern: external investors could jeopardize the professional independence of tax consultants.

Constitutional concerns of lawyers

Ashurst partner Florian Hirschmann takes a critical view of the amendment. He argues with possible violations of EU law and constitutional principles. Infringement proceedings have already been ongoing against Germany since 2018 due to the Tax Consultancy Act - the new draft could create further legal problems. The EU Commission criticizes the contradictory structure of the German system: high quality requirements for tax advisors are juxtaposed with exemptions for income tax assistance associations or banks with lower standards.

Existing investments in limbo

Legal uncertainty arises for already established PE investments. The Ministry of Finance has signaled that existing structures can be continued if the ban on third-party ownership is also complied with at the parent company. Hirschmann takes a different view: "Without explicit protection of legitimate expectations, restructuring could become necessary. The exit will also be problematic: future buyers will have to comply with the new requirements, which will drastically restrict the circle of potential buyers. Family offices or other PE companies will no longer be interested buyers.

Industry between innovation and tradition

Taylor Wessing partner Amir-Said Ghassabeh warns of negative consequences: A prohibition on third-party ownership that is too rigid could hinder access to capital, innovation and international cooperation. Digitalization and succession issues would remain unresolved. Trustberg partner Clemens Engelhardt hopes for constructive discussions during the legislative process. The focus should be on the client, but the provider side must also be allowed to remain sustainable.

Long road to adoption

Hirschmann does not expect the final adoption until mid to late 2026. Until then, the draft will go through several readings and committee consultations - time for substantial changes. The industry is faced with the question of whether private equity will really bring the hoped-for solutions to fragmentation and the digitalization gap or whether traditional structures are better suited.