For various tax arrangements and also to use an optimal depreciation, it may be necessary to evaluate a brand. “Trademark” is the generic term for the so-called goodwill, i.e. the market value of a company, insofar as it goes beyond the purely material objects in the company. If you want to evaluate a brand, you determine the difference between the market value of the company and the so-called substance value.

1. When it is necessary or useful to evaluate a brand

For purposes of German tax law, it is rarely necessary or even obligatory to evaluate a brand. The reason for this is § 5 paragraph 2 EStG, which also applies to corporations such as the GmbH or cooperative society via § 8 paragraph 1 KStG. According to this standard, intangible assets created by the taxable person may be capitalised only if they have been acquired for profit by the taxable person.

Trademarks, licenses, patents and goodwill are also intangible assets. However, since the respective company usually creates these values itself, for example through marketing and registration of rights, there is a lack of a paid acquisition of third parties. Since this in turn precludes activation according to § 5 paragraph 2 EStG, there is no need to evaluate the brand or the right.

It is different when an entrepreneur buys existing businesses or transfers them to Germany. Also in the case of the transfer of sole proprietorships, co-entrepreneur shares and corporations to other legal entities, a paid acquisition can be fictitious. In such cases, it may be necessary to evaluate brands in order to determine the basis for subsequent depreciation.

2nd submission and transfer to Germany – a brand evaluation is required here

Evaluating a brand or determining the goodwill of a company is necessary, especially in cases of contribution. This may lead to the discovery of hidden reserves. The evaluation may also be necessary when transferring a sole proprietorship or share of a joint venture to Germany. In these cases, § 4 (1) sentence 8 second sentence EStG applies, which fictitious a so-called deposit.

If a brand or goodwill is determined and it is capable of depreciation, § 7 (1) sentence 3 EStG applies. The normal period of use of such an intangible economic asset has been set by the legislator at 15 years. Therefore, the company’s assets are to be written off evenly (linear) over this period.

2.1. Contribution of a sole proprietorship or share of a joint venture

According to § 24 (1) UmwStG, individual and co-entrepreneur shares can bring their companies, subsidiaries or co-entrepreneur shares into a partnership. The transfer has the consequence that the previous sole proprietorship or the partial operation is subsequently continued by the co-entrepreneurship (partnership).

§ 24 paragraph 2 of the UmwStG provides for the value with which the partnership has to recognise the transferred assets. The submitting entrepreneur shall have the right to choose between: