German tax law knows how to record so-called untangled profits. They are always created when entrepreneurs or private individuals transfer certain economic goods from Germany abroad. In these cases, the German Treasury taxes “one last time”, but then usually the entire company or market value of the transferred object. We give an overview of the emergence of untangled profits!
1. background to the taxation of derailment profits
Business assets are subject to a so-called tax entanglement in Germany. Neither the sale nor the withdrawal into private assets is tax neutral, i.e. without tax burden, possible. As a rule, the difference between the extraction value or the sale price is taxed here, which can lead to a significant tax burden.
The term “untangled” refers to the removal or disposal operation. The respective asset was therefore removed or sold and is therefore no longer in the operating assets. A possible increase in value is thus in many cases also no longer subject to taxation, because, for example, a property can be sold tax-free 10 years after the withdrawal from the business assets (§ 23 (1) no. 1 EStG).
The taxation of profits derailed has the following background: The legislator assumes that the increase in the value of economic goods in Germany is also due to the environment created by politics and administration. These advantages, which entrepreneurs “draw” from infrastructure and which are expressed in money or a positive performance, should be subject to taxation.
A de-knitting profit arises especially when transferring assets abroad. Because here the Treasury loses the right to tax and has only the possibility to tax the entire value of the respective object at the time of transfer abroad. After the transfer, such profit is subject to the law of the State to which the asset was transferred.
2. The individual de-knitting gains at a glance
The profits of untaking include all those profits, the realization of which the legislature assumes by a legal fiction. Normal withdrawals or disposals are therefore not covered by this term. Rather, this means taking assets abroad, which German tax law treats as a sale of these assets at their current market value.
The known de-knitting facts are:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.