date | theme

01. April 2021 | The design option with leased properties within the framework of the anticipated succession acc. § 6 Abs. 1 No. 5 and § 7 Abs. 5 EStG (this contribution)

01. March 2021 | Acquire and renovate protected property – 6 tax benefits

24. February 2021 | Rental income tax-free: Debt financing reduces profit

24. November 2020 | Advantages of partnerships in real estate transfer tax

05. November 2020 | The advantages of a GbR when buying a commercial property

16. September 2020 | Valuation of old construction properties in the case of inheritance tax and gift tax

09. September 2020 | No real estate acquisition tax when acquiring real estate via share deal

If a taxable person places assets (e.g. real estate) that have previously served to generate surplus income (e.g. letting + lease/ § 21 EStG) into a business asset, the contribution value is reduced (§ 6 para. 1 no. 5 EStG) by the previously used depreciation, special AfA or increased depreciation (§ 7 para 1 p. 5 EStG). The regulations just mentioned could give rise to the design consideration of transferring real estate of the private assets to the special business assets by means of corresponding design measures and thereby, in the event of a subsequent anticipated succession, the tax exemption or tax exemption. tax neutrality. The questions arising from such a design are explained in more detail with the aid of a case study.

According to the wording of § 6 para. 1 EStG, the valuation regulations are only for the valuation of winners according to § 4 para. 1 in conjunction with § 5 EStG applicable. [1] However, jurisprudence and literature also transferred the principles of the provision to profit-seekers pursuant to § 4 para. 3 EStG;[2] for these cases this is in the meantime by § 6 para. 7 No. 2 EStG is expressly regulated in this sense. The same applies to the determination of profits for corporate tax subjects. [3] According to § 6 Abs. 1 No. 5 EStG deposits are in principle to be recognised at the partial value. [4] By way of derogation from the principle of valuation with acquisition and production costs, it is intended to ensure that a contribution does not entail the risk of having to pay tax on hidden reserves formed in private assets free of tax or already taxed in another way on the basis of the contribution and a subsequent de-entanglement. [5] In this case, the deposit value is to be capped if the supplied economic goods e.g. acquired or produced within the last three years before the supply (§ 6 para 1 no. 5 p. 1 HS 2 letter a) EStG). This is a misuse prevention rule. These restrictions make it difficult for the taxable person to obtain untaxed profits due to increases in the value of assets by postponing the time of deposit or by temporary withdrawal into private assets. [6]

1.2. Subsequent valuation of usable assets after contribution to an operating asset acc. § 7 Abs. 1 p. 5 EStG

The provision of § 7 para. 5 EStG deals with the assessment of the AfA after transfer of an economic asset from the area of surplus income (§ 2 para. 1 S. 1 No. 4 – 7 EStG) in the field of profit income (§ 2 para S. 1 No. 1 – 3 EStG).[7] In this case, an independent AfA tax base deviating from the deposit value is defined. This is to avoid writing off economic goods twice (multiple). [8] Starting point for the determination of the AfA tax base after a contribution according to § 6 Abs. 5 EStG is the deposit value, i.e. the sub-value of the asset. The deposit must in principle be made into the operating assets of the trader, for example. In this case, the operating assets can be attributed to the sole proprietor, a partnership or a capital company. According to this provision, the valuation of the deposit (with the partial value) is not affected, but orders that the AfA tax base be reduced by the depreciation used in the period before the deposit and thus fall below or can fall below the deposit value. [9] Ultimately, this corresponds to the idea of § 6 Abs. 1 No. 5 p. 2 EStG, whereby the scheme reduces the deposit value of the asset as such. Furthermore, § 6 Abs. 1 No. 5 S. 2 EStG only a reduction by the rule AfA, but not by AfA substance reductions, special AfA and increased AfA. First of all, the norm of § 7 Abs. 1 S. 5 EStG has a meaning for the provisions of § 6 para. 1 No 5 S. 1 HS. 1 EStG, i.e. for deposits at partial value. [10]

The regulations just discussed are further elucidated by a case study in the following section. [] 11]

2nd basic structure before deposit and transfer

Ms. (F) leases her two built-up properties to H GmbH & Co. KG (KG), whose only limited partner is her husband (E). Komplementär-GmbH is not a shareholder in the limited partnership. The income from renting and leasing is in accordance with § 21 Abs. 1 no. 1 EStG. The following picture illustrates what the current corporate structure looks like and what the structure should look like through restructuring measures.

The partial value of the land amounts to EUR 8,000,000, with the share of land and land being 25% (= EUR 2,000,000) and the partial value of the buildings being 75%, i.e. EUR 6,000,000. F acquired the land with standing buildings 15 years ago at an acquisition cost of EUR 5.600,000, of which EUR 4.200.00 was attributable to the buildings. As part of the income pursuant to § 21 EStG, it has claimed a total of EUR 1.260,000 as an AfA until 01.08.2014.

As of 01.08.2014, E transfers a share of 5% from his 100% shareholding in the limited partnership to his wife F. The value of the share is calculated in accordance with German law. § 151 Abs. 1 No. 2 BewG with 3,200,000 EUR. The (young) administrative assets have according to § 13b Abs. 7 S. 2 ErbStG a value of 0 €. As a result, F irrevocably requests a tax exemption of 100 %. Until then, F has not received any gifts from her husband E (no prior acquisitions; § 14 ErbStG).

On 01.10.2014, F transferred its 5 % share of the limited partnership in the limited partnership and the two built-up land leased to the limited partnership to its subsidiary T. The value of the 5 % share of the limited partnership and the (young) management assets determined in this context has not changed until this date. According to § 151 Abs. 1 No. 1 BewG for the two properties corresponds to the market value and also amounts to €8 million. T also irrevocably applied for a tax exemption of 100 %. So far, T has not received any gifts from her mother F (no prior acquisitions; § 14 ErbStG).

The donation of the 5% share of the command by E to F takes place according to § 6 para. 3 EStG at tax-neutral book values. According to § 6 para 3 p. 1 HS. 2 EStG can also be transferred a part of a share of a co-entrepreneur at book values to a natural person.

Practical note: If part of the co-entrepreneur’s share of the E special assets, which he does not share in the transfer, the five-year retention period acc. § 6 Abs. 3 S. 2 EStG. (Cf. BMF of 20.11.2019 – IV C 6 – S 2241/15/10003, BStBl. I 2019, p. 1291, paragraph 29)

Due to the lease of the two built-up plots of land from F to the KG, they have been part of F’s special assets at the KG since 01.08.2014. A joint entrepreneurial division does not exist at this time, as F is the sole lessor and no sister partnership exists. [12] For the depreciation of the built-up land, this means that, with regard to the AfA, after a contribution from the private assets to the special business assets, the value of the contributions according to § 6 para. 1 No. 5 S. 1 EStG. The deposit value is in principle the partial value (§ 6 Abs.). 1 Nr. 5 S. 1 HS. 1 EStG.

Practical note: In the case of the – in this case not available – Deposit of a usable asset in an operating asset within three years after acquisition or manufacture (§ 6 para.). 1 No. 5 S. 1 HS. 2a in conjunction with S. 2 EStG, the contribution value is determined on the basis of the acquisition or production costs minus the AfA pursuant to § 7 EStG, the increased deductions (extra-scheduled AfA) and any special depreciation due to the period between the acquisition or production of the asset and the contribution. This applies irrespective of whether the asset was used to generate income before the contribution (R 6.12 para 1 EStR).

Since the assets have been transferred to an operating asset after use to generate income according to § 21 EStG, according to § 7 para. 5 EStG one of the deposit value according to § 6 para. 1 No. 5 S. 1 EStG deviating AfA tax base. In this case, the deposit value shall be reduced by the AfA, reduction in substance, special AfA or increased AfA made up to the time of the deposit, but not more than up to the continuing acquisition or production costs; if the deposit value is lower than this value, the further AfA shall be measured by the deposit value.

The deposit value of the asset in the present case[13] is higher than the historical acquisition or production costs, as a result of which the depreciation is to be measured from the time of the deposit in accordance with the deposit value reduced by the AfA already used.

The assessment basis for the AfA of the building in the operating assets is EUR 4,740,000. This is calculated on the basis of the deposit value (EUR 6,000,000) minus the AfA (EUR 1.260,000) drawn up so far, because the deposit value (EUR 6,000,000) is higher than the historical acquisition costs (EUR 4.200,000). According to § 7 para 4 p. 1 no. 1 EStG, according to § 7 para. 5 EStG, after the contribution, make an annual depreciation of EUR 142,200 (= 3 % of EUR 4,740,000). [] 14]

4th Inheritance Tax: Transfer of the KG shares from husband E to wife F

In this process F receives by the donation of the 5% share of the limited partnership according to § 7 para. 1 no. 1 ErbStG beneficiary assets according to § 13b para 1 no. 2 ErbStG in the value of € 3.2 million. The tax exemption of 100% irrevocably requested by F is to be granted in accordance with § 13a para 10 ErbStG.

5th income tax: transfer of the share of the company from Ms. F to daughter T

The donation from F to T of the 5 % share of the limited partnership, including the built-up land belonging to the special business assets, is made acc. § 6 Abs. 3 EStG on book values. The special assets of F included in the share of the co-entrepreneur will be transferred in full, so that the five-year retention period acc. § 6 Abs. 3 S. 2 EStG is not to be observed. [] 15)

Practical note: An already existing retention period by a prior acquisition of F from E would not be infringed by passing on by way of donation. A free sub-transfer shall not be harmful for the retention period. However, the retention period shall pass to the legal successor. The legal successor shall be credited with the retention period of the transferee. (Cf. BMF of 20.11.2019 – IV C 6 – S 2241/15/10003, BStBl. I 2019, p. 1291, paragraph 30)

The donation by F of the 5 % share in T, including the built-up land belonging to the special business assets, does not require a reassessment either for the share in the limited partnership or for the land.

If economic units are acquired several times within one year, the respective management tax office has to base the valuation on an already established property value (underlying value) if no significant changes have occurred within that year. The underlying value existing in this case is the real estate value determined for the first acquisition case on the respective valuation date (§ 151 para.). 3 BewG.[16] On the basis of this provision, the value of EUR 3,200,000 as at 01.08.14 is to be used for the 5% share of the command donated on 01.10.14. For the land in the special assets, the value of EUR 8,000,000 as established on 01.08.14 should be used.

By donating the 5% share of the limited partnership, T receives beneficiary assets within the meaning of § 13b para. 1 No. 2 ErbStG. The irrevocably requested tax exemption by T is also pursuant to § 13a Abs. 10 ErbStG in the amount of 100% in this case.

Abuse of design (§ 42 AO) under the aspect of the donation of the limited partnership share with the consequence of the contribution of the land cannot be assumed. For the taxation, only the circumstances at the time of the execution of the gift from F to T on 01.10.14 as the time of the tax origin (§ 9 para 1 no. 2 ErbStG, § 11 ErbStG) are relevant. In addition, it is not certain that the design ultimately leads to a tax saving.

7th Tax Savings through Deposit / Hidden Reserves & Business Tax

If the property had been given out of private property, it would have to be taxed using the personal allowance. The gift tax saved is calculated as follows: