Recently Friede Springer transferred a fortune worth about 1 billion euros tax-free to Mathias Döpfner by donation. This is a share package of Axel Springer SE. We suspect that the Springer shares went to the CEO of Axel Springer SE without gift tax only because he previously used all his assets to buy another package of Axel Springer shares. Mathias Döpfner acquired 4.1% of the shares in Axel Springer SE from the Friede Springer Foundation. This allows him to subsequently submit an application for the gift tax remission, which must be granted only if there is no available assets with which the otherwise arising gift tax could be paid. And since the purchased shares are not available assets, Mr. Döpfner can expect the gift tax to be waived.

In the video we explain how in our opinion Friede Springer was able to transfer a share package worth EUR 1 billion to Mathias Döpfner tax-free.

1st donation of Axel Springer shares

The media received with great interest the news that Friede Springer gifted Axel Springer shares worth EUR 1 billion to the CEO of Axel Springer SE, Mathias Döpfner. Another detail has also come to the public, namely that Mathias Döpfner previously bought a share package worth EUR 276 million from the Friede Springer Foundation. Less known was the also interesting news that the donation by Friede Springer following the purchase of the Axel Springer shares apparently takes place without the otherwise incurred gift tax. Therefore, we ask what circumstances lead to the exclusion of the gift tax. On this occasion, we analyze here the connections that we believe may have led to the tax-free transfer of the Axel Springer shares to Mathias Döpfner.

Legal basis for the donation of Axel Springer shares

Generally, the process of gifting assets is taxable in Germany. This taxation is based on the inheritance tax law. With the help of this law, the legislature has determined that inheritances and gifts are generally subject to the same taxation. Therefore, in the following we refer to this law.

Since the donation of the share package to Axel Springer shares constitutes a transfer of shares in a corporation, we also want to pay attention to this aspect in our analysis of the legal basis. In particular, § 13b ErbStG is of interest. This is because it contains the criteria that condition a tax-advantageous treatment of such assets. Because if a tax-free gift of the Axel Springer shares to Mathias Döpfner took place, then this legal detail certainly played a major role.

The first act in this tax spectacle is the purchase of Axel Springer shares worth EUR 276 million, which Mathias Döpfner acquired from the Friede Springer Foundation. This corresponds to a stake of 4.1% in Axel Springer SE. Previously, Mathias Döpfner, who also serves as CEO of Axel Springer SE, already held 2.8% of the shares. Mathias Döpfner’s stake in Axel Springer SE increased to 6.9% as a result of the acquisition.

It can be assumed that at the time of the purchase of the Axel Springer shares it was already clear that Friede Springer would give Mathias Döpfner the further shares worth EUR 1 billion. It is therefore reasonable to assume that the purchase of the 4,1 % shares is related to the subsequent tax-free donation of the Axel Springer shares.

4th donation of Axel Springer shares by Friede Springer

So now we consider how Friede Springer’s gift to Mathias Döpfner could remain tax-free. To put it straight away, the purchase of the Axel Springer shares shortly before the gift is the key to achieving the goal of transferring the share package to Mathias Döpfner tax-free.

4.1. Axel Springer shares as beneficiary assets

But let’s start elsewhere. First of all, it is necessary to clarify the influence on taxation of the fact that a donation of shares in a limited company took place.

Under certain conditions, such shareholdings are to be regarded as tax-advantaged assets. For this purpose, we refer to § 13b ErbStG in the Inheritance Tax Act and read there under paragraph 1 no. 3 that a direct participation of the donor to at least 25% in a limited company with registered office in Germany is required. So we check whether Friede Springer fulfilled this condition at the time of the gift.

As far as known, Friede Springer held 42.6% of the shares in Axel Springer SE at the time of the donation. Axel Springer SE is also based in Germany. This means that all conditions are met for the gifted Axel Springer shares to be regarded as eligible assets.

4.2. No relief discount for the donation of Axel Springer shares

As a rule, the statutory standard for the treatment of shares in a corporation in the case of a donation within the scope of the tax exemption in § 13a ErbStG applies. Here one can obtain a so-called protection discount, which makes the gift either 85% or even 100% tax-free. However, there is an upper limit of EUR 26 million for the assets to be transferred.

What is to be observed in addition to this amount when taxing such a gift is regulated by § 13c ErbStG. For each full amount of EUR 750,000 that is higher, the relief discount decreases by 1% each, so that from an asset of EUR 90 million no further benefit of the gift takes place. However, the value of the assets in Axel Springer shares donated by Friede Springer to Mathias Döpfner is well above this maximum amount for the relief discount. Thus, this option cannot have played a role in the tax-free gift.

4.3. Application for gift tax waiver in the case of the transfer of beneficiary property

However, another legal norm is linked to the definition of the beneficiary property by § 13b ErbStG. Because with the protection requirements test according to § 28a ErbStG, the legislature provides an alternative to § 13c ErbStG. § 28a ErbStG promises that a gift of assets with a value of more than EUR 26 million can be made completely tax-free if certain conditions are met.

One of these conditions is that the assets to be transferred are actually also to be regarded as beneficiaries under § 13b ErbStG. As we have previously stated, this is also the case with the donation of the Axel Springer shares by Friede Springer to Mathias Döpfner.

The second requirement concerns the so-called available assets of the recipient. This concerns the property that is available to the recipient of the gift at the time of the gift to pay the gift tax. Among other things, it is regulated here that the gift received is only part of the available assets if the gift also transfers assets other than those benefiting under § 13b ErbStG. When Friede Springer donated the Axel Springer shares, however, only beneficiary assets were transferred. Therefore, Mathias Döpfner can submit the application for the waiver of the gift tax on the entire share package.

4.4. Remission of gift tax can be retroactively revoked

But he must also observe other conditions here, because otherwise the tax office can also revoke the remission of the gift tax subsequently. On the one hand, Axel Springer shares are now subject to a blocking period of seven years. In addition, the annual salary of the company is included in the tax waiver. There must be no reduction in the amount of the annual wage sum within the same period. In the opposite case, a subsequent taxation of the gift takes place, which corresponds to the percentage of the reduction of the annual wage sum. In addition, the tax office can revoke the remission of the gift tax if Mr. Döpfner receives further property within ten years by gift or inheritance, which can be qualified as available property.

Now one may assume that Mathias Döpfner will comply with all conditions. But how can he convince the tax office that he had no available assets at the time of the gift? After all, this is hard to imagine with a top manager like him.

4.5. How Mathias Döpfner used the purchase of Axel Springer shares for tax purposes

Therefore, we assume that the purchase of Axel Springer shares by Mathias Döpfner was aimed at reducing his existing assets to zero in order to be able to argue that no available assets existed at the time of the donation. In this context, the Axel Springer shares purchased as well as those previously held in Mathias Döpfner’s assets are equivalent to the beneficiary assets, so that they remain out of recognition in the legal valuation of Mr Döpfner’s available assets. In this way, Mathias Döpfner can submit the application for the remission of the gift tax and thus save around half a billion euros.