// private equity in german tax advisory

pe investors and tax advisory firms: what the new german rules mean for deal structuring

private equity has discovered tax advisory. the logic is straightforward: a fragmented market of thousands of owner-managed firms, recurring mandates, predictable cash flows, and a demographic wave of partners approaching retirement without succession plans. for investors focused on market consolidation, the sector has looked almost purpose-built.

that picture is now more complicated. on 24 april 2026, the german federal parliament (bundestag) passed the ninth amendment to the tax advisory act (neuntes gesetz zur änderung des steuerberatungsgesetzes), and with it a meaningful tightening of the prohibition on non-professional ownership (fremdbesitzverbot) — the rule restricting external equity participation in tax advisory firms. the upper house of parliament (bundesrat) is expected to vote on 8 may 2026. the legislative outcome, after months of intense debate and competing political signals, is clear: external equity participation in tax advisory professional practice entities (steuerberatungsgesellschaften) will remain possible only within narrow limits.

what the new law actually says

the core change is a new sentence inserted into § 55a abs. 1 of the tax advisory act (steuerberatungsgesetz, stberg) — specifically § 55a abs. 1 satz 3 stberg, added by the finance committee (finanzausschuss) as amendment 2. under this provision: recognised audit firms (wirtschaftsprüfungsgesellschaften and buchprüfungsgesellschaften) may only hold stakes in tax advisory firms if they themselves — and any entities involved directly or indirectly in the ownership chain — satisfy the recognition requirements under § 53 abs. 2 satz 1 nr. 1 stberg. the sole statutory exception is § 55b abs. 3 stberg, which governs certain grandfathered structures.

this closes the gap that had been used to route investment capital through audit firm vehicles into the tax advisory sector while maintaining the formal appearance of professional ownership. the bundestag was explicit in the parliamentary record: investors may not circumvent the so-called fremdbesitzverbot via luxembourg or other offshore holding structures either. where an audit vehicle does not substantively satisfy the professional recognition requirements at every tier of the ownership chain, the participation is impermissible.

accompanying amendment 3 introduced a new § 76e stberg, creating mandatory disclosure obligations. wherever a recognised audit firm participates in a tax advisory entity, the managing directors or authorised representatives of that entity must notify the competent chamber of tax advisors (steuerberaterkammer) of any change in any direct or indirect shareholder — including at sub-holding levels. the chamber may request supporting documentation, including corporate registry extracts. this transparency mechanism is designed to give the regulators real-time visibility into ownership chains that previously remained opaque.

a separate transitional provision in § 154 abs. 2 stberg — also amended — makes clear that existing structures involving intermediary entities that do not satisfy the capital restriction rules (§ 55a stberg or § 28 abs. 4 wirtschaftsprüferordnung) are subject to the same unwinding obligations as the core entity. how transition periods and tolerance arrangements will operate in practice for existing deals remains open; the bundesrat's consideration on 8 may 2026 may provide further clarity.

the political trajectory

the path to this outcome was anything but linear. the ministry of finance (bundesministerium der finanzen, bmf) published a draft bill containing the clarification on 7 august 2025. the federal cabinet (bundeskabinett) removed it from the government bill in january 2026, before the upper house (bundesrat) pushed to reinsert it in march. at first reading in the bundestag on 19 march 2026, the governing coalition signalled it would not tighten the rules. by 22 april 2026, the finance committee had reversed course — amendments 2 and 3 were adopted.

throughout this process, professional associations — led by the federal chamber of tax advisors (bundessteuerberaterkammer, bstbk) and the german association of tax advisors (deutscher steuerberaterverband, dstv) — argued consistently that the prohibition on non-professional ownership is not a technical professional law detail but a deliberate regulatory choice: tax advisory is a public-interest function, and the independence of the advisor from commercial return pressures is part of what makes the system work. the legislative record references the european court of justice's december 2024 ruling in case c-295/23, which held that member states may legitimately restrict pure financial investment in law firm structures to protect professional independence — an argument the coalition applied by analogy to tax advisory.

what this means for deal structures

for investors already active in the sector and for those still evaluating entry, the new law reshapes the available architecture at every level of the ownership chain.

direct equity participation through non-professional holding companies is now explicitly closed. structures that routed investment through audit vehicles that did not substantively meet the recognition requirements face legal exposure under both the new § 55a abs. 1 satz 3 stberg and the amended § 154 abs. 2 stberg. the transition arrangements, once confirmed, will determine how much runway existing structures have — but planning on the basis that current arrangements persist indefinitely is no longer defensible.

what remains available, at least under current law, is a set of instruments that fall short of direct equity. profit participation rights (genussrechte), subordinated loan facilities, and carefully structured long-term service or licensing arrangements can replicate meaningful economic exposure without triggering the so-called fremdbesitzverbot. the risk here is recharacterisation: where control provisions accompany profit participation, regulators may treat the arrangement as a de facto equity interest. documentation and governance design matter enormously, and the new disclosure obligations under § 76e stberg mean that the steuerberaterkammer will have enhanced visibility into all such arrangements where an audit vehicle is in the chain.

management equity programs continue to be viable, pairing professional majority ownership with investor economics through put/call mechanics and tag-along rights. the tax treatment of equity granted at a discount to fair market value — and whether recipients realise taxable income at grant — requires careful analysis under the relevant income tax provisions.

holding company structures that place the investor above a non-regulated entity, which in turn provides services to the regulated firm below, remain theoretically possible — but only where every entity in the chain genuinely satisfies the recognition requirements. the parliamentary record makes clear that the legislature specifically intended to prevent circumvention through multi-tier structures (mehrstöckige gesellschaften), and the finanzausschuss was explicit that this was the purpose of the new satz 3.

exit and what comes next

exit planning is where many of these structures run into their most acute difficulty. the pool of permitted acquirers at exit is constrained by the same rules that govern entry. secondary sales to other investment vehicles face the same regulatory analysis. structures that work at acquisition must therefore also be assessed for exit viability — the two cannot be decoupled.

the broader question is what the market looks like in five years. a survey found that roughly two thirds of practitioners expect significant market consolidation regardless of the investment question. the models they identify — partner-led groups, bank-financed regional consolidators, and organically grown multi-site firms — suggest that the sector will consolidate with or without external capital. the bstbk has pointed out in its submissions that alternative financing routes — bank lending, kfw development bank programmes, and it vendor licensing models — are available and do not require opening the ownership structure to outside investors.

conclusion

the new law, specifically the new § 55a abs. 1 satz 3 stberg and the accompanying § 76e stberg, resolves a period of regulatory uncertainty but does not close the market entirely. investment in the german tax advisory sector remains possible, but the structuring parameters are now significantly tighter — and critically, the ownership chain requirement applies not just at the first tier but at every level of the structure. those who built arrangements on the assumption that the so-called fremdbesitzverbot would not be enforced through multi-tier vehicles will need to reassess their position before any transition arrangements are finalised.

for investors and advisors navigating this environment, the lesson is familiar: regulatory risk in professional services markets is real, moves quickly, and rewards those who build structures with legal robustness rather than creative optimism.