date | theme

15.06.2019 | Division of operations: Requirements – Legal consequences – Avoidance

17.06.2019 | Legal consequences of the company split (this contribution)

19.06.2019 | Personal interdependence: domination – groups of people – relatives

21.06.2019 | The material interdependence in the split operation

24.06.2019 | The minority shareholder at Besitz-GbR

27.06.2019 | The Wiesbaden model: avoiding the division of businesses with spouses

A division of operations always has legal consequences. One of these can lead to the creation of operating assets. Furthermore, tax disadvantages in business tax are also possible. However, a business split also offers advantages, because from a tax point of view, for example, one can use the allocation of losses in the context of a partnership. Further advantages relate to the deductibility of the general salaries of a corporation or the inclusion of contributions to occupational pension schemes.

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.

1st operating split is available

If the conditions for the division of operations are met, the holding company also operates a business enterprise in addition to the operating company, which is also subject to business tax. [50] As a result, income that is not subject to business tax, such as income from renting and leasing, is reclassified into income from business operations. Consequently, the assets of the shareholder no longer constitute private assets under tax law but operating assets. The holding company is subject to business tax. [51] The requalification concerns only the holding company, since the operating company always generates commercial income, either by virtue of its activity or by virtue of law, such as corporations. The requalification is comprehensive in terms of personnel. This means that not only the “both-and-shareholders” receive commercial income, but also the sole shareholders as well as the shareholders who are only involved in the holding company. [52] However, a requalification of income only occurs if the operating company generates commercial income. If the holding company is an agricultural or forestry activity or a self-employed activity, no requalification of income is carried out, even if all the conditions for a division of the holding are met.

If the conditions for operating splits are no longer met, the operating split is dissolved. The end of the business split is according to the case law of BFH regularly as an operating task acc. §16 para 3 EstG, with the consequence that all hidden reserves are to be dissolved in a profit-increasing manner. [53] This includes both the hidden reserves of the holding company and the operating company.

3rd Benefits of Operating Split

Among the many disadvantages of operating splitting, however, it also has advantages. An important reason for the division of a business is the tax advantages. In the case of a genuine division of operations, the tax advantages of a partnership are combined with the tax advantages of a corporation. [54] The advantage in partnerships is primarily the direct attribution of losses. Losses of a personally liable partner may be offset against other income immediately in the year of creation. The advantage of a limited liability company is the tax deductibility of the managing directors' salaries of the operating company and the possibility of the profit-reducing formation of a pension provision. It has been repeatedly confirmed by the BFH that the managing director, even if he is also a shareholder of the holding company in the context of a business split, receives income from non-self-employment pursuant to § 19 EStG[55], whereby the salaries at the GmbH constitute deductible operating expenses. With regard to the total tax burden, however, the corporate and business tax savings of the GmbH must be compared with the individual income tax burden of the managing director on the basis of the progression level. However, the subsequent taxation of the later payment of occupational pension schemes at least creates a deferral advantage in any case.