date | theme

22. September 2018 | Asset Deal at the GmbH purchase: Purchase price tax depreciation (this contribution)

26. October 2018 | Share Deal: Company Purchase & Sale of a GmbH

09. November 2018 | Share Deal at the GmbH: 3 designs for tax optimization

17. May 2019 | Purchase of GmbH: Share Deal and Asset Deal – 3 designs for the buyer

The purchase and sale of GmbHs plays an increasingly important role in medium-sized companies. Thus, they are not only confronted with the tax issue of correct taxation in the actual transaction structure, but also in the final contract drafting. The purchase of a company is usually made through an asset deal or a share deal.

In an earlier article in our tax blog, we already explained the company purchase as part of a so-called “share deal”. On the other hand, there is talk of a “share deal” when the shares in a company – for example the GmbH shares – are sold. Thus, the so-called “asset deal” forms the counterpart to the “share deal”. Therefore, we would like to explain the asset deal with its tax peculiarities and risks below.

2nd Definition of Asset Deal

An “asset deal” is a transaction structure in which the company is purchased through the acquisition of assets. The special feature here is that the assets, such as machinery, licenses, land and buildings, are transferred individually to the buyer. In this context, it should be noted that the transfer of the entire assets of a legal entity of the notarial deed acc. § 311b para 3 BGB is required.

Basically, an asset deal is possible in any form of company. However, in order to take advantage of the tax peculiarities implemented, the company form must be preferred as a partnership from the point of view of the buyer.

Advantages of an asset deal from the buyer’s point of view

While the seller is usually subject to relatively high tax burdens in the context of an asset deal, the buyer enjoys several tax advantages:

Depreciation of goodwill and total purchase price

On the one hand, the acquiring company can depreciate the transferred assets for tax purposes. For this purpose, the total purchase price is to be distributed among the acquired assets, so that all assets in the balance sheet of the acquirer are to be recognised at the market value. These are subject to depreciation over the normal operating period according to § 7 Abs. 1 sentence 1 EStG. If the purchase price exceeds the intangible value of all tangible and intangible assets, the additional purchase price share constitutes a remuneration for the existing corporate structure and organization and is subject to § 7 para. 1 sentence 3 EStG tax depreciation over 15 years. However, if the purchase price paid is demonstrably not goodwill, this is exceptionally deductible as an immediate expense. Depending on the legal form of the acquirer, this leads to a total tax reduction of about 30 percent (corporations) or 50 percent (partnerships) of the purchase price paid at the latest after a 15-year period.

As a result, all acquired assets are to be accounted for and depreciated for tax purposes over their useful life. This brings many tax advantages that the acquirer does not have in the share deal.

3.2. Including borrowing costs

In addition, it is possible for the buyer to take fully into account for tax purposes all borrowing costs associated with the acquisition of the individual assets. However, depending on the amount, there may be restrictions due to the interest rate barrier. Thus, attention must be paid to tax-optimized financing in the drafting of contracts.

On the one hand, from the buyer’s point of view, the advantages usually outweigh the disadvantages. Nevertheless, the acquirer of the company must consider the following aspects:

4.1. Due diligence in the acquisition of companies inevitable

As a rule, the seller is better informed about the goodwill and future earnings than the prospective buyer, so that there is an information balance at the expense of the buyer. In addition, to achieve a high purchase price, the seller is willing to provide you with only positive information and conceals the negative ones. Therefore, in order to avoid risks in a company purchase, we always recommend that you carry out a due diligence check in advance, during which a detailed check of the company data may be carried out by the buyer. This examination makes it possible to identify possible problems, risks and liability issues and to take them into account when concluding the contract.

4.2 Company transfer liability according to § 75 AO

The buyer takes over not only the assets, but also the debts. In this context, the liability rule of § 75 AO plays a central role if the company is not in insolvency. In the case of a business sale as a whole, § 75 AO stipulates that the buyer is liable for both operating taxes and tax deduction amounts. The condition for this is that the taxes have been incurred from the beginning of the last calendar year prior to the transfer and are fixed or declared until the expiry of one year after the company has been registered by the buyer. The buyer is personally liable, but limited to the company’s stock.

4.3. Consideration of any loss carry forward

Furthermore, when buying a company with existing loss carry forwards, it should be noted that they do not pass to the buyer in the context of an asset deal, so that their effective use is excluded.

Also in the share deal, loss carry forwards according to § 8c KStG are generally not taken into account by the acquirer.

5. special features in the acquisition of individual assets

5.1. Transfer of business according to § 613a BGB: Transfer of employment contracts of employees

In the context of a transfer of business, the asset deals result in all existing employment relationships being transferred to the buyer in accordance with § 613a BGB. It is noteworthy that this does not require any contractual arrangements; It takes place automatically. For example, it can happen that the buyer of this extent does not notice anything at first. Therefore, one should check the affirmation of the transfer of business in individual cases. Therefore, in the event of a transfer of business, employees should be informed of this. They will be given a period of time to refuse.

5.2 Real estate transfer tax on real estate

This is a big difference between asset deal and share deal. If you also purchase real estate as part of the company purchase, you must check the real estate acquisition tax:

In the case of the share deal, the real estate acquisition tax is generally only incurred if the acquirer acquires at least 95% of the shares in the acquisition company.

On the other hand, the acquisition of real estate under the asset deal is regularly subject to real estate transfer tax according to § 1 Abs. 1 No. 1 and 2 GrEStG. This is independent of the level of participation. It should be noted that the level of real estate transfer tax has risen sharply in recent years and thus leads to a high tax burden.

As part of the asset deal, the buyer acquires the pure property and acquires the ownership status, which requires the land register registration. By law, the existing lease contracts are transferred to the purchaser. Other contracts, such as loan and insurance contracts, or assets are to be transferred separately if you wish to acquire them. In this context, it should be noted that, for example, the transfer of contracts generally requires the consent of the contracting parties.

5.3. VAT on company purchases

If the company is bought in its entirety, there is usually no sales tax. After all, it is a so-called business sale in its entirety, which according to § 1 Abs. 1 a is not controllable. This applies to the sale of business as a share deal and as an asset deal.