date | theme

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

17. March 2019 | Corporate sale: Tax-optimized sale of the partnership

17. July 2020 | Taxes on the sale of companies: sole proprietorship/ GmbH/ GmbH & Co. KG/ Holding

14. August 2020 | The Corporate Purchase Agreement – Contents of a Share Deal

22. April 2021 | Buy shares – write off purchase price in supplementary balance sheet (this contribution)

While the purchase of a corporation distinguishes between an asset deal and a share deal, this does not apply to the purchase of shares in a partnership. There is no distinction for tax purposes here, since a share deal is like an asset deal. Because in a share deal, as in an ordinary asset deal, the price to be paid for the shares is distributed among the individual assets. In addition, an increased remuneration can be written off as goodwill in a supplementary balance sheet. This reduces the profit attributable to the new shareholder in the future periods.

Upon purchase of a share of a partnership, the entering shareholder usually takes over the shares of a leaving shareholder. These shares correspond to the shareholding in the company. In addition, the company shares are required for calculating the hidden reserves uncovered.

By leaving the shareholder, the entering shareholder takes over his capital account in the balance sheet. Furthermore, the new shareholder will continue this in the future.

1.2. Capital account of the departing shareholder

Consequently, it is necessary to determine the value of the capital account of the departing shareholder. This can be read directly on the balance sheet as book value when keeping a single capital account per shareholder. Nevertheless, the determination of the corresponding value may consist of several capital accounts.

First of all, the capital account I applies to the deposits of a shareholder corresponding to the articles of association. Accordingly, these deposits are in principle not removable from the company and are referred to as fixed capital. In addition, this account changes only in the event of capital increases or reductions.

In contrast, there is also a capital account II, which represents the unextracted profits and losses of the individual shareholders. In addition, this lists the deposits and withdrawals made by a shareholder outside the contribution to be made under company law. In addition, a shareholder can deposit less than was agreed in the articles of association. This is shown in this account.

In addition, a company may agree to a restriction on the withdrawal of profits. In this case, the capital account III represents the profits that can be withdrawn and the capital account II represents profits that remain in the company.

For further explanations and the following example, it is spoken of only one capital account and a readable book value in the balance sheet.

1.3. Silent reserves of the outgoing shareholder

The above-mentioned shares are required to determine the hidden reserves for the shareholders. The purchase price for the shares may exceed the book value of the capital account of the outgoing shareholder. In this case, the value of the proportionate hidden reserves of the individual assets must be compared with the additional expense for the acquired shares. It is inevitable that the hidden reserves are uncovered during an operational task. The sale of a shareholder’s shares and its termination of operations constitutes such an operational task.

Hidden reserves arise if the actual value of the asset exceeds the value shown in the balance sheet. These may arise, inter alia, from over-recognition of liabilities or under-recognition of assets. This includes, for example, investments in fixed assets (e.g. buildings, machines, etc.), which are ultimately usable longer than originally planned. As a result, the assets are already fully written off on the balance sheet, whereas a sale can still achieve a certain price. In addition, for example, costs for guarantee provisions, uncertain future obligations or imminent losses can be estimated higher than they ultimately defaulted. The total hidden reserves are finally distributed to all participating shareholders.

1.4 Purchase price for the company shares

The purchase price of the company shares also represents the acquisition costs to be capitalized acc. § 6 Abs. 1 EStG for the entering shareholder. The seller, i.e. the outgoing co-entrepreneur, often includes several factors. On the one hand, he determines the sales price on the basis of the capital account in addition to the hidden reserves, which he as a shareholder is responsible for. On the other hand, he adds to this the entrepreneurial success to be expected in the future, which is not visible in the balance sheet. Because only this total value corresponds to the true value of the company share. The purchase price can thus exceed the book value of the capital account of the outgoing shareholder. In addition, the purchase price may also exceed the book value of the receiving capital account and the proportionate hidden reserves. Accordingly, a so-called goodwill (GoF) according to § 246 Abs. 1 sentence 4 HGB in a supplementary balance sheet for the entering shareholder.

1.5. Goodwill on the purchase of shares

By including future prospects of success of the company in the purchase price when purchasing shares, this can exceed the hidden reserves and the book value of the capital account. These prospects of success are based on various factors. This includes a good image of the company, the know-how of the employees, existing customers or a special brand name. However, these factors are usually difficult to estimate.

However, this so-called goodwill acc. § 7 Abs. 3 EStG over a period of 15 years. Consequently, this amount must also be reflected in some way in the balance sheet. Nevertheless, this goodwill (GoF) is used exclusively for the correction of the assets of the entering partner shown in the total hand of the partnership. This correction must therefore be made elsewhere. As a result, in the case of partnerships, a supplementary balance sheet is usually drawn up when acquiring shares in return for payment.

1.6. Establishment of a supplementary balance sheet

If an increased purchase price for shares in a partnership is paid, this must be recorded in a special supplementary balance sheet of the entering shareholder. The assets listed therein also apply to the assets of the company. In particular, the paid overcapital is allocated to the hidden reserves from the assets as well as any existing goodwill or goodwill. This is explained below using a suitable example.

The sale of an interest in a partnership is described by way of example below. In A & B KG, the two shareholders A and B each hold a 50% stake. The respective capital accounts amount to 150. In addition, the KG owns a machine, supplies and cash assets. This is the balance sheet:

2.2 Purchase of the share: Shareholder B sold to C

Now B sells its share in A&B KG to the C that has entered the company for 350. Since the capital account of B is 150 when its co-entrepreneur share is sold, this value is now continued for shareholder C:

To prepare a supplementary balance sheet, it is necessary to determine the hidden reserves. The following table illustrates this by way of example:

In addition, after the determination of the hidden reserves, the share attributable to C was determined. This amounts to 50 for the hidden reserves of the machine, since the entering shareholder also takes over 50 % of the shares in the company. This leaves a difference of 150. This is accounted for in a goodwill (GoF) as shown in the supplementary balance sheet below:

2.3. Continuation of supplementary balance sheet in subsequent period

In the first subsequent period, the depreciation rules in the supplementary balance sheet must be applied. For the machine, for example, a linear depreciation over 10 years is carried out, this can vary depending on the machine in practice. If necessary, we support you in the implementation of the legally regulated depreciation method or the determination of depreciation values. The share of 50 thus results in a write-down in the first subsequent period of 5. The goodwill is in principle according to § 7 Abs. 1 S. 3 EStG over 15 years evenly written off. In this case, a value of 150 gives an annual scheduled depreciation of 10.

The additional balance at the end of the first subsequent period is as follows:

2.4 Declaration of effects

Consequently, the depreciation of assets and goodwill in the supplementary balance sheet reduces the profit of the C by 15. In addition, the profit share of the C will also be reduced in the future. However, the sale of B’s share in the partnership does not alter its profit.

Thus, when buying a share in a partnership, it can be stated that an increased purchase price is recorded in a separate balance sheet. This so-called supplementary balance sheet is only prepared for the incoming shareholder if the purchase price for the shares exceeds the capital account of the outgoing shareholder. After the calculation of the hidden reserves, they are written off in subsequent years in accordance with the valuation rules. Accordingly, we deal with any existing goodwill.