According to § 1 Ia UStG, sales in the context of business sales are not taxable. The requirement of tax exemption is that the transactions take place within the framework of the transfer of all the company assets or a separately managed business of the company. In addition, the company or operation must be transferred as a whole. Furthermore, the acquirer must be an entrepreneur before the transfer or become it through the transfer. But which forms of business sale are included and what are the concrete consequences of tax exemption? All these questions are clarified by this contribution.

Asset Deal & Share Deal: Taking advantage of tax advantages when buying and selling GmbH!

1. tax exemption of the sale of business, § 1 Ia UStG

§ 1 Ia UstG regulates the exclusion of the business sale from sales tax. This scheme affects all such sales which would actually comply with § 1 I No. 1 UStG. Therefore, according to § 3 Ib No. 1, IXa No. 2 UStG, free transfers are also affected by the regulation of § 1 Ia UStG. § 1 Ia UStG is intended to avoid liquidity burdens and unnecessary administrative burdens. However, the standard presents difficulties, since it is usually difficult to determine whether there are business sales or partial business sales. It is important to get good advice on this distinction. They are threatened with revered re-taxation or the retroactive refusal of the VAT deduction.

2 Requirements for non-taxability of sales

According to § 1 Ia S. 2 UStG, a business sale is a transfer of a company or a business managed separately in the structure of the company, whether in return for payment or free of charge, or the transfer of the same into an existing company. The prerequisite of § 1 Ia S. 1 UStG is therefore that the transactions take place within the framework of the transfer of the entire company assets or a separately managed operation of the company. In addition, the company or operation must be transferred as a whole. Furthermore, the acquirer must be an entrepreneur before the transfer or become it through the transfer. All these features are explained in more detail below:

2.1. Transfer of an entire company or a separately managed business

A separate operation is any organizational unit within the framework of the existing company as a whole that is economically viable from the point of view of the acquirer. It is therefore necessary that the transferred entity enables the company to continue. Accordingly, it is sufficient if the company is still in the start-up phase. Therefore, the individual rights transfer of assets, so-called asset deal, continues to include the transfer of companies to existing companies by way of individual rights transfer or the free transfer by way of the anticipated succession. In the absence of a taxable service and therefore in the absence of controllability, the acquisition by inheritance does not fall under § 1 Ia UStG. Furthermore, § 1 Ia UStG also includes conversions under the UmwG.

2.2.1 Share deal as a business sale?

It appears problematic whether the share deal constitutes a business sale within the meaning of § 1 Ia UStG. This is a transfer of holdings. For the time being, this is countered by the fact that, due to the tax exemption of Section 4 No. 8 (f) of the UStG, no simplification effect occurs and no liquidity burdens are to be feared. Nevertheless, the interested parties can waive this tax exemption pursuant to § 9 I UStG. This should be advised if the standard taxation option is more advantageous for them. This can of course lead to tax losses on the part of the Treasury. Accordingly, the overriding view assumes that the share deal falls under § 1 Ia UStG. However, this presupposes that all shares in the company are sold.

Ultimately, however, this view can also be critically assessed. An argument with fiscal motives is not always justifiable. In addition, the law provides for the option for standard taxation in § 1 Ia UStG. This option is necessary because the tax exemption should benefit the taxpayer. However, it does not do so if the taxable person suffers disadvantages from tax exemption because of the refusal to deduct VAT. However, this mechanism could then always be leveraged with the above-mentioned argument, since the option usually threatens the tax authorities with tax losses. Nevertheless, the prevailing view assumes that the share deal is subject to VAT. With the above-mentioned arguments, it may therefore not make sense to sell all shareholdings at once and to exercise the option of standard taxation under § 9 I UStG. They should therefore seek sufficient advice before the sale.

In addition, the company must be transferred in its entirety. As a result, all of the material shareholdings existing in the previous company must be transferred to the acquirer in close temporal and factual context within the framework of a single transaction. The delegation by a single act is not necessary. It may therefore be more sensible in the context of the share deal to sell part of the participation earlier and the other part later, at a time when the temporal relationship no longer exists. For example, a sale would be possible two years after the first sale.

2.3. Acquisition of the sale of business as an entrepreneur

Furthermore, the acquirer must be or become an entrepreneur at the time of the transfer. It is therefore necessary to intend to continue the business acquired with the previous business activity, which was not necessarily identical.

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3. Consequences of non-taxability of sales

According to § 1 Ia S.1 UStG, the legal consequence of the sale of business is that all transfers are not taxable. According to § 1 Ia S.3 UStG, the acquirer will continue to be treated as a legal successor to the company. The acquirer therefore enters into the VAT legal position of the original entrepreneur with regard to the acquired assets. VAT charges incurred by the vendor in connection with the sale of business for the purposes of deduction of VAT are to be allocated to the transactions carried out in the transferring business. However, due to the lack of taxability of the sale of business, the deduction of input tax is not granted for services directly and directly linked to the sale. The direct and direct link to the sale must be determined on the basis of objective circumstances.