Corporations and in particular corporations such as the GmbH can form various reserves. The profit reserve is one of the most prominent representatives. It contains profits that the corporation has not distributed to its shareholders. However, the shareholders can also convert such reserves into nominal capital – and this is where the special ID according to § 28 KStG comes into play.

According to § 57c (1) GmbHG, shareholders can convert existing reserves of their corporation into nominal capital. In terms of balance sheet, this is only a liability swap, but for tax purposes, such a conversion can have several consequences. The background is the different legal nature of the liabilities ‘reserve’ and ‘share capital’, in particular in the case of repayment or repayment.

Because the repayment of nominal capital is not originally taxable, but profit distributions according to § 20 (1) no. 1 EStG. A conversion of profits (which are taxable if distributed) into nominal capital would therefore result in their taxation not being imposed in this respect.

According to § 28 (1) sentence 3 KStG, the obligation to issue a special card applies to amounts converted in this way. This is to ensure that in the event of a subsequent distribution it is clear to what extent benefits from current profits, retained earnings and the tax deposit account have been granted.

The special identity card in corporate tax also serves transparency. This is because the conversion of a reserve into share capital increases this, but no “new money” was added to society from the outside. Nevertheless, an outsider could assume a capital increase and thus an increase in the company’s value.

In order to ensure taxation of the reserves converted into nominal capital upon repayment of all or part of the nominal capital, the special certificate provides for a certain order according to § 28 KStG. According to § 28 (1) sentence 1 KStG, the stock of the tax deposit account is initially considered converted. Decisive according to § 28 (1) sentence 2 KStG is the stock of that marketing year in which the conversion according to § 57c GmbHG takes place.

In the tax balance sheet, the share of nominal capital attributable to converted reserves is to be shown separately. According to § 27 (2) KStG, a separate determination is made (§ 28 (1) sentence 3 and 4 KStG).

If there is a special card according to § 28 (1) KStG at the end of a marketing year, this is reduced by the positive stock of the tax deposit account. The decisive factor is the last day of the marketing year, usually 31.12. (§ 28 paragraph 3 KStG). Consequently, the special statement under § 28 KStG and the tax deposit account under § 27 KStG can never coexist.

If the nominal capital of the corporation concerned is reduced or the company is dissolved (liquidation), this will initially reduce the special statement insofar as the original contribution to the nominal capital was made (§ 28 (2) sentence 1 KStG). A possibly exceeding reduction amount is attributable to the tax deposit account within the meaning of § 27 KStG. Disbursements from this are not taxable according to § 20 (1) no. 1 sentence 3 EStG, so that the classification of corporate tax law (tax neutrality of the share capital contribution and disbursement) is restored.

Insofar as a reduction of the special statement according to § 28 paragraph 2 sentence 1 KStG takes place by disbursement of the nominal capital to the shareholders, this is deemed to be a reference according to § 20 paragraph 1 no. 2 EStG. The amount exceeding the reduced special statement reduces the stock of the tax deposit account and, insofar as the stock is also too low according to § 27 KStG, is also considered a distribution according to § 20 (1) no. 2 EStG (§ 28 (2) sentence 3 and 4 KStG).

If, as a result of the provisions of § 28 KStG, there is a disbursement of capital income pursuant to § 20 (1) no. 2 EStG, the disbursing corporation is obliged to withhold the capital income tax as in the case of regular profit distributions. The provisions of § 44 (1) sentence 3 EStG apply accordingly in this respect.