Tightening of the German Tax Advisory Act: key considerations for affected structures now

In our article of 22 August 2025, we reported on the then draft bill of the German Federal Ministry of Finance (Bundesministerium der Finanzen). It was intended to prevent financial investors from acquiring indirect interests in tax advisory firms through multi-tier structures involving foreign audit firms. After a protracted legislative process, what was then only a draft has now become law, taking effect from 3 July 2026.The regional Chambers of Tax Advisors (Steuerberaterkammer) have already begun to revoke the recognition of affected tax advisory firms under the German Tax Advisory Act (Steuerberatungsgesetz) (the “Act”) and to reject pending applications for recognition as tax advisory firms under the new provision. This is despite serious concerns as to the compatibility of the rules with EU law and constitutional law; actions challenging revocation notices are already pending. However, investment in an audit firm and the provision of tax advisory services through an audit firm remain possible. The national Chamber of Auditors (Wirtschaftsprüferkammer) has expressly approved indirect financial-investor investment in German audit firms via EU audit firms and, in guidance issued at the end of July 2026, set out clear governance requirements for such structures. Affected multi-tier ownership groups can therefore act ‒ and should do so now.

A. Section 55a of the Act in force since 3 July 2026

The Ninth Act to Amend the Tax Advisory Act was signed into law on 29 June 2026 and published in the Federal Law Gazette (Bundesgesetzblatt) on 2 July 2026. The relevant amendments came into force on 3 July 2026.

The second sentence of section 55a(1) of the Act further tightens the prohibition on third-party ownership of tax advisory firms. In the investment scenarios specified there, including where an audit firm holds an interest, it now requires every entity holding a direct or indirect interest to satisfy at all times the recognition requirements set out in point 1 of the first sentence of section 53(2) of the Act.

The new rule particularly affects structures involving EU audit firms incorporated in jurisdictions that do not impose a strict prohibition on third-party ownership. Where an EU audit firm holds an indirect interest in a German tax advisory firm through an audit firm recognised in Germany, it may now do so only if its own direct and indirect shareholders also satisfy the recognition requirements of the Act. Accordingly, multi-tier investment structures involving a foreign EU audit firm, which previously provided a route for financial investors to acquire indirect interests in German tax advisory firms, are no longer permitted under the Act.

B. Incompatibility with EU and constitutional law

The new third sentence of section 55a(1) of the Act gives rise to serious concerns regarding its compatibility with EU law and constitutional requirements. Under EU law, the extended prohibition on third-party ownership and investment conflicts with the EU Services Directive (Article 15(1), Article 15(2)(c) and Article 15(3) of the Services Directive), as it is neither necessary nor proportionate. In particular, the legislature’s attempt to draw a parallel between tax advisors and lawyers is misconceived and cannot be sustained under EU law. Furthermore, the provision infringes the “home-country principle” under Article 34(1) of the EU Audit Directive as well as the free movement of capital under Article 63(1) TFEU. From a constitutional perspective, it constitutes a disproportionate interference with the freedom to pursue an occupation under Article 12(1) of the German Basic Law (Grundgesetz) and the guarantee of property under Article 14(1) of the German Basic Law. In practical terms, it amounts to a statutory requirement to unwind the existing ownership structure.

C. Practical implications

Despite these serious legal concerns, the regional Chambers of Tax Advisors have already started to act. They are revoking the recognition of tax advisory firms whose ownership structure is no longer permissible under the new rules. They are also rejecting pending applications for recognition where the tightened requirements are not met. Affected firms therefore need to act urgently. This is particularly so because the Ninth Act to Amend the Tax Advisory Act contains neither transitional provisions nor grandfathering rules. The new provisions therefore apply immediately to structures that have already been established and recognised. Unlike previous tightenings of the prohibition on third-party ownership, where the legislature consistently provided grandfathering protection (section 154 of the Act and section 134a(2) of the German Auditors Code (Wirtschaftsprüferordnung)), existing firms are affected by the new legal position without any adjustment period. This considerably increases the need for action.

Nonetheless, providing tax advisory services through audit firms remains a viable option for keeping existing structures operational. Tax advisory services do not necessarily have to be provided by a tax advisory firm under the Act. Under point 3 of section 3 of the Act, audit firms are also authorised to provide unrestricted assistance in tax matters. An audit firm may therefore provide comprehensive tax advisory services.

Affected firms may bring an action before a fiscal court against a revocation. Such an action will have a suspensive effect. This will provide sufficient time to consider reorganising as an audit firm, adapting governance arrangements and preparing the recognition process.

D. An audit firm as an alternative to a tax advisory firm

Affected tax advisory firms should assess whether they can be reorganised so that tax advisory services are provided through an audit firm. Under point 1 of the first sentence of section 28(4) of the German Auditors Code, European statutory auditors and European audit firms may continue to be shareholders in an audit firm. Indirect involvement by financial investors through an EU audit firm therefore remains possible in principle under the German Auditors Code and the EU Audit Directive.

The Chamber of Auditors expressly reaffirmed this position in July 2026. Its updated guidance on recognition as an audit firm sets out the framework for audit firms in which non-professional shareholders, such as financial investors, hold indirect interests through an EU/EEA audit firm. In the Chamber of Auditors’ view, such a structure does not jeopardise responsible management, professional independence or the quality of services, provided the applicable requirements are met.

The guidance sets out 13 specific provisions that must be included in an audit firm’s articles of association. They are designed to ensure that professionally qualified auditors retain responsibility for managing the firm, while limiting the influence of non-professional shareholders. They include, in particular:

• A definition of responsible management, its incorporation into the articles of association and auditors’ ultimate decision-making authority.
• The appointment of at least one auditor as a legal representative, together with requirements governing management and other decision-making bodies. Decisions falling within the scope of responsible management must not be subject to third-party veto rights or consent requirements.
• The right of auditor shareholders to exercise their shareholder rights free from instructions, a prohibition on collateral agreements outside the articles of association and a prohibition on voting arrangements that bind managing directors or shareholders who are auditors.
• Transparency and notification obligations, including the prompt submission to the Chamber of Auditors of rules of procedure and any amendments as well as disclosure to the Chamber of Auditors of the EU audit firm and its direct and indirect shareholders.

E. Conclusion and Outlook

The German Auditors Code’s requirements are highly specific but proportionate and can generally be met in practice. They establish clear rules for financial-investor involvement: the articles of association allocate responsibilities, protect professional independence and ensure transparency in relation to the Chamber of Auditors This provides the necessary legal certainty for firms and investors. If an audit firm does not meet the requirements, the Chamber of Auditors may refuse recognition or revoke it after allowing an appropriate period for compliance. Conversely, compliance with the requirements provides a reliable degree of legal certainty.

Affected firms should therefore promptly assess reorganising as audit firms, amend their articles of association to meet the Chamber of Auditors’ requirements and prepare the recognition process with the Chamber. The Chamber of Auditors’ guidance sets out clear requirements, making the necessary adjustments predictable and readily implementable.