date | theme

06.07.2020 | Lock periods in conversion tax law – contribution in kind and exchange of shares

08.07.2020 | Closure periods for merger and change of form in GmbH & Co. KG: § 6 UmwStG(this contribution)

10.07.2020 | Tax neutral division: What is the blocking period for a split or separation?

12.07.2020 | Conversion of the GmbH into a GmbH & Co. KG: blocking period 5 years!blocking period § 18 Abs. 3 UmwStG

14.07.2020 | Lock period for contributions in kind: § 22 para. 2 UmwStG

16.07.2020 | 7 years blocking period when entering GmbH: § 24 Abs. 5 UmwStG

The transfer of assets of a corporation to a partnership can take place in different ways. The conversion tax law provides, among other things, the change of form of a corporation into a partnership acc. § 9 UmwStG. Furthermore, there is the possibility of a division or separation into a partnership acc. § 16 UmwStG. The possibility of a merger of the limited company into a partnership provides for § 3 UmwStG. These processes can all be carried out in a tax-neutral manner. However, account must be taken of the different blocking periods in order to prevent subsequent taxation of hidden reserves.

If in such a conversion the combination of claims and liabilities leads to an increase in profit, a tax-free reserve can be formed for this purpose. However, a blocking period of 5 years must be observed (§ 6 para 3 UmwStG). During this five-year blocking period, the transferred operation was not to be transferred to a limited liability company, sold or abandoned.

§ 6 UmwStG refers to the transfer of assets in the event of a merger to a partnership or a natural person and to the change of legal form of a corporation into a partnership. [3] § 6 UmwStG is intended to mitigate tax disadvantages resulting from these transactions by creating reserves. [] 4]

Classification of the regulation

Existing claims and liabilities between the transferring and assuming legal entity or the dissolution of provisions may result in subsequent acquisition gains (§ 6 para.). 1 UmwStG.[5] In the case of existing receivables and liabilities, the profit is derived from the fact that they have been recognised in the tax balance sheet at different values, for example by receivables that become partly eligible. In civil law, the merging, and associated cancellation of mutual claims and liabilities, leads to a conclusion. [6] If, however, unequal values are recorded in the balance sheets, the result at the level of the acquiring company is that claims and liabilities no longer coincide and expire. [7]

Instead, a takeover profit (also second stage takeover profit or conversion profit) arises, which according to § 18 para. 1 UmwStG and § 19 Abs. § 12 Abs. 4 UmwStG is subject to trade tax as current profit. [8] According to § 6 Abs. 1 S. 1 UmwStG allows the assuming legal entity in this case to form a reserve that reduces tax profit. [9] This is to be dissolved in the next three marketing years with at least one third increasing profit (§ 6 Abs. 1 S. 2 UmwStG).[10]

According to § 12 para. 4 UmwStG § 6 UmwStG also applies mutatis mutandis in the case of a merger or transfer of assets to another corporation for that part of the profit from the combination of claims and liabilities which corresponds to the participation of the acquiring company in the share capital or share capital of the transferring corporation. [] 11]

This means § 12 para. 4 applies only in the case of an upstream merger for arising gains on receivables and liabilities. [12] By reference in § 15 para. 1 UmwStG becomes § 12 Abs. 4, however, is also used for divisions and separations and for transfers of assets to other entities. [] 13]

§ 6 Abs. 3 UmwStG retroactively denies you the right to reserve formation as soon as the acquiring legal entity transfers the transferred operation to a corporation within five years after the tax transfer date or sells or abandons it without a valid reason. [] 14]

Essential for operation i.S.d. § 6 Abs. 3 UmwStG are the functional and quantitative operating bases of the transferred operation or the transfer of the entire shares of the acquiring legal entity. If, on the other hand, a partial operation is introduced, sold or abandoned, the process remains undesirable as long as further essential operating bases are part of the transferred operation, i.e. only individual shares of the acquiring entity are sold. [] 15)

The period begins at the time of the tax transfer date i.S.d § 2 para. 1 UmwStG and ends after 5 calendar years. [] 16]

A valid reason exists if, since the date of the decision to convert, the economic situation of the company has changed in such a way that a sale or abandonment of the business can be considered economically meaningful. [17] Consequently, the taxpayer must be able to demonstrate that the cessation or sale is not intended to avoid tax but, for example, to restructure or rationalise the companies involved. [18] In addition, illness with the necessary personal cooperation, death of the entrepreneur, liquidity problems or the sale by heirs can be considered as a valid reason. [] 19]

However, if the buyer could foresee at the time of resolution that a business sale or operation task is imminent, this will take place without valid reason and § 6 para. 3 UmwStG. [] 20]

Legal consequences of § 6 para. 1 UmwStG are a retroactive omission of paragraphs 1 and 2.[21] In § 6 para. 3 S. 2 UmwStG there is an independent correction standard, according to which already issued tax decisions, tax measurement decisions, exemption or determination decisions are to be changed, insofar as they are based on the application of paragraphs one and two. [] 22]