The legal consequences of a business split include the commerciality of the owner. The consequences of commercial activity are, among other things, the requalification of the previous private income (e.g. rental and leasing) into income from commercial operations, which are taxed accordingly.

In the video we show you various strategies to avoid a division of operations in advance, as well as in retrospect or to consciously maintain it.

1. ownership enterprise as a business enterprise

The paid rental / transfer of use of assets is taxed within the framework of private income according to § 21 EStG (rental and lease). The assets (e.g. a property) are in private assets, while a transfer of use of operating assets on the basis of § 21 (3) EStG always constitute income from commercial operations according to § 15 (1) no. 2 EStG. [111]

With the present factual and personnel connection and the associated division of operations, in the classical case a new business instinct is founded on the part of the owner company.[112] Thus, the previously private rental by a natural person/partnership becomes a commercially qualified rental.[113] In addition, the previous private property is converted into business assets at the same time in unison. [114]

1.1 Rental of assets

Furthermore, it should be noted that the shareholders of the holding company who are not involved in the operating company also earn commercial income on the basis of § 15 (3) EStG. [115] Another special feature on the part of the owning company is an additional rental of assets to third parties. According to the theory of infection[116], in partnerships these rental incomes are also to be assigned to commercial income according to § 15 (3) No. 1 EStG.[117] This approach applies not only to rental income but also to all income of the holding company. [118]

It should also be noted that the income of an enterprise which has previously earned either income from self-employment or income from agriculture and forestry is to be attributed to commercial income with the fulfilment of the criteria of the division of operations. [119]

The operating company is a commercial enterprise either according to § 15 (2) EStG, by virtue of coloring according to § 15 (3) no. 1 EStG, by virtue of commercial characterization according to § 15 (3) no. 2 EStG or by virtue of legal form according to § 8 (2) KStG. Therefore, an operating company that generates income from § 13 or 18 EStG has problems. According to the case law of the BFH[120], a commercial activity of the operating company is obligatory, which then also results in a commercial activity of the holding company. According to the literature, this opinion cannot be followed. On the contrary, the commercial activity of the owning company is of its own accord, since an increased risk is incurred by the rental, which would not arise in the case of an external rental. [121]

Tax consultants to avoid division of operations

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