date | theme

23. August 2018 | GmbH loss carry forwards: § 8c KStG unconstitutional -> objection & deadline

11. November 2018 | Save the loss carry forwards at the GmbH: the new § 8d KStG helps!

17. February 2019 | Buy loss carryforwards from GmbH: 6 new strategies for the use of losses

26. April 2019 | GmbH loss report: Success across the board at BFH

09. May 2019 | Continuation-related loss carry forward according to § 8d KStG

03. November 2021 | Purchase of coat – Is it possible and what needs to be considered? (this contribution)

When buying a coat, the first priority is the purchase of a company. Special criteria must be observed for this, especially the legal form of the company often plays a decisive role. The special thing about this shell purchase is now the purchase of a mere company shell, where the company is usually broke or at least no longer active. Nevertheless, it is questionable how this project is possible or whether the coat purchase is a construct of bygone days. In doing so, we discuss various standards of the tax law and explain to what extent existing loss carry forwards of this purchased company can be used.

We develop individual design models for each client to receive loss carry forwards. Due to the current relevance, we have published several contributions on this topic:

Until 2007, §8(4) KStG was significantly restrictive for shell purchases. However, this paragraph left too much room for manoeuvre for companies to undermine the actual goal. Indeed, under this scheme, the general consensus was that the acquiring company could benefit from all losses provided that it was economically and legally the same person who suffered the losses. This was legally relatively often practicable and feasible for the shaping society. Nevertheless, this development was rather unintended by the legislator, so that as soon as small changes were made. However, the main point against the continuation of the original scheme was that the coats were often no longer really active as a company and thus the tax profit should only be reduced for another company.

As of the assessment period 2008, §8c KStG was used, which was introduced by the UntStReformG. In the following, there are further comments on § 8c and § 8d KStG.

First of all, it is important to pay special attention to the legal form of the companies involved in the shell purchase. In principle, no loss carry forward can be assumed when a partnership is taken over on the basis of two principles. On the one hand, this is opposed by corporate identity. The second is entrepreneurial identity. The former states that losses can only be offset at the company and thus used in which they have also incurred. The second principle also states this for the shareholders, because the loss carry forward is distributed among the individual shareholders. Since each shareholder can now independently sell his shares, the assessment of the loss carried forward is made on the basis of the shares that change hands.

Due to this principle, it can be complicated to simply take over the loss carry-forwards, in the case of a corporation this is done according to a different scheme, since this is not done according to the transparency principle.

On the other hand, the loss treatment of the corporation is much different. Because of the separation principle, the loss carry forwards are always collected at the corporation. It is thus possible to transfer these loss carry forwards to other companies by purchase, provided that certain criteria are met.

Basically, this difference already shows that the takeover of a corporation brings interesting advantages for its business activities as well as from a tax perspective.

According to §8c (1) sentence 2 KStG, the harmful shareholder is a change of shareholder if more than 50 % of the shares are transferred and then the loss carry-forward in the acquired company finally disappears. In this case, the losses are even completely and not only proportionally lost. Thus, a possible variant to avert loss loss is logically less than 50% of the shares. However, there is also the consequence that the acquiring company cannot fully or not at all dispose of the loss carry forward. This makes this a rather unattractive alternative to buying the majority shares.

Due to various clauses under §8c KStG, of which at least one should be actively used, an existing loss carry forward can still be used in many cases of a purchase of more than 50% of the shares. Further explanations are given.

Until 29 March 2017, a quota loss loss was very much within the scope of the possible. Because from that time onwards, due to the decision of the BVerfG, no further loss loss was possible. However, the decision was only taken on 11 December 2018. Thus, the loss carry-forward is now either completely retained or this is otherwise completely lost. This scheme shall apply retroactively to the 2008 marketing year.

The various exceptional cases of § 8c (1) KStG are listed below. In particular, the Group clause, the silent reserve clause and, since 2016, the continued loss carry forward are of enormous practical relevance. Furthermore, as a result of the global financial and economic crisis in 2008, the so-called restructuring clause in §8c(1a) KStG was added to the first two clauses and became a permanent tax law instrument to further facilitate the use of loss carry forwards.

First of all, the group clause installed in §8c (1) sentence 4 KStG must be considered. Because here is the first exception to the loss carry-forward. If either the transferring, the acquiring or both entities have the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer or the acquirer. if the seller is 100 percent involved, there is no harmful shareholding acquisition.

In addition, the silent reserve clause according to §8c (1) sentence 5 ff. KStG in order to continue to use the loss carry forwards and not let them disappear. The difference between the purchase price and equity capital is offset against the existing loss carry forwards. If the loss carry forward or the loss carry forwards are used up, the topic is thus closed. Otherwise, the loss carry forwards are not yet exhausted and there is still a need for design to obtain the loss carry forward.

In addition, the restructuring clause was introduced immediately after the silent reserves clause and the Group clause in 2008. The priority here is that share transfers with the aim of restructuring are not subject to the loss carry-forward. Because the operation should in principle be maintained in this way, but for this the over-indebtedness or an already occurred insolvency must be replaced. Here, the criteria of § 8c (1)a sentence 3 KStG for the preservation of the operating structures must be observed. For this clause to be needed, compliance by the taxable entity must be proven. It is important to know in the context of insolvency that no insolvency proceedings have to be started at this time.

In addition, the 5-year blocking period must be observed, according to which no change of industry or company within this period. a change in the company’s business activities. In addition, the business may not yet cease.

The relatively latest change to receive the loss carry forward is anchored in § 8d KStG. Through a so-called continuation-related loss carry forward, the assumed losses can be used for continuation through an application and in accordance with some criteria. It is mainly not necessary to make any significant changes in business operations in the following three years, otherwise this attempt to obtain losses becomes obsolete.

For a precise determination of the losses of trade tax and corporate tax loss carry forwards, it is important to look into the respective laws. Although §8c KStG is a corporate tax norm, it also applies to areas of the Business Tax Act. According to § 10a sentence 9 or Sentence 10 GewStG, trade tax loss carry forwards are lost, provided the conditions in § 8c KStG are met.

In accordance with §8c (1) sentence 1 KStG, all corporate tax loss carry-forwards, any interest carry-forwards as well as the current losses are irrevocably lost, provided that more than 50% of the voting rights or the shares are transferred to a buyer or a related person. It is necessary to add up the shares transferred over the last five years. Thus, the same applies to loss carry-forwards from business tax. This results in a permanent disadvantage in direct effect on the liquidity of the acquiring company.

Since the change in the tax framework for shell purchases, these continue to be an interesting means of reducing a company’s tax income. Nevertheless, one can no longer speak of coat purchases, as one did earlier. Because the acquired companies must no longer be just a shell without operational activities, that is the big difference and also today's acceptance for the takeover of loss carry forwards.

§8c KStG regulated many exceptions to the original cancellation regime for loss carry-forwards, which resulted in significant relief for taxpayers. The elimination of the share loss loss after a share acquisition of 25 % resulted in a less strict handling of the purchase of share capital envelopes, especially since 2018. However, it is finally necessary to examine the individual case in order not to experience the expensive acquaintance with a demise of the loss carry-forwards, which is why the whole undertaking was undertaken in the first place. Therefore, we are very happy if we can help you with any questions about the purchase of coat by phone or personally.