Shares in corporations are usually transferred to an existing holding GmbH by way of the so-called share exchange. However, this path is eliminated at book values and thus tax-neutral if the holding company does not hold a majority of the voting rights in the transferred company after the share exchange. Nevertheless, the contribution of a minority share, among other things via the detour of the co-entrepreneurship, is tax-neutral possible!

Minority participation and share exchange – what regulates § 21 UmwStG?

Shareholders can transfer their shares in one corporation to another corporation, for example a holding company. In return, they receive shares in Holding GmbH, as the following example shows:

The former sole proprietor Max has already brought his sole proprietorship into a GmbH three years ago, but the shares held 100% in private assets. However, since he wants to divest the operating business within the next 10 years, he opts for a holding structure. After the restructuring, he would like to participate 100 % in Holding GmbH, which in turn holds 100 % of the shares in the operating company.

According to § 21 (1) sentence 1 UmwStG, such an exchange of shares is possible at common values, i.e. by discovering all hidden reserves. However, if it is to be carried out at book values, the requirements of sentence 2 must be met.

The proverbial sticking point here is that the holding company must hold a majority stake in the transferred company after the share exchange. A GmbH share which comprises 50 % or less of the share capital (minority participation) can therefore not be transferred tax-neutrally into a GmbH or cooperative.

Minority interests are regularly held by several participants. Suppose that Max had founded the GmbH together with two business partners at that time and all three had a 33.33 % share in the company. In isolation, each shareholder now holds a minority shareholding, which prevents the tax-neutral transfer of the shares into an independent holding company.

Note: If two of the three shareholders would establish a joint holding company and contribute their respective shares here, the requirements of § 21 (1) sentence 2 UmwStG would be fulfilled. After the share exchange, the holding company does not hold a minority stake, but holds more than 50 % of the operating company. Both shareholders have each contributed 33.3% of the shares, resulting in a total shareholding of 66.67 %.

Introducing minority participation: possibilities for book value transfer

The contribution of a minority interest within the framework of the share exchange always leads according to § 21 (1) sentence 1 UmwStG to the discovery of the hidden reserves. Although this can be unproblematic in individual cases or even advantageous due to the then not effective blocking periods (§ 22 UmwStG), as a rule, a tax-neutral transfer of the shares is to be sought. For this purpose, a shareholder or a shareholder now has several alternative ways available. Here, too, we make use of the possibilities of conversion tax law.

2.1 Way one: Establishment of an atypically silent society

The minority shareholders of the GmbH can each participate individually or by joint agreement atypically silently in the company of the GmbH. As a rule, the silent partner receives profit shares through his participation and, as is absolutely necessary for the model, also has voting, control and instruction rights.

Because the atypical silent partnership is a co-entrepreneurship, the participants can contribute their respective co-entrepreneur shares to the holding company tax-neutrally at book values in accordance with § 20 paragraph 2 of the UmwStG. How exactly to proceed, we have already explained in more detail in our contribution to the atypically silent society as a “contribution vehicle”.

2.2 Way two: Establishment of a Einheits-GmbH & Co. KG

The so-called “piggyback model”, which also works with a sole proprietorship, is usually implemented in practice with the help of a GmbH & Co. KG. The aim is to allocate the minority shareholding to a transferable material group and to transfer it to the holding company at book values in accordance with § 20 of the UmwStG. According to § 24 UmwStG, a transfer is also possible to a holding company, here also tax-neutral.

The minority shareholders thus first set up a Einheits-GmbH & Co. KG, in which they hold a 100% stake. They now invest their share in operative GmbH in the (voluntary) operating assets of the company with a commercial character (§ 15 (3) no. 2 EStG).

In the next step,