The supplementary invoice is a tax corrective measure that applies in certain cases to partnerships. It shall ensure that the cost of acquiring shares in a partnership is taken into account when determining the tax share of the profits of a newly acquired partner. This involves in particular the entry into partnerships, which determine their profit by profit calculation instead of by drawing up balance sheets. For accounting partnerships, a supplementary balance sheet must be drawn up for these purposes. However, since the supplementary account is linked to the surplus income account as a profit determination method, those rules must also apply to the supplementary account. At the same time, the principles are based on the specifications for the preparation of supplementary balance sheets.

A partnership can be established as both a commercial and a wealth management company. Although partnerships are usually considered commercial (Handelsgesellschaft durch Handelsgewerbe according to § 105 (1) HGB). However, § 105 paragraph 2 HGB also provides for the exception for partnerships that operate a pure asset management.

However, this different treatment of partnerships can also have tax consequences. This is the case, for example, in commercial infection. While the commercial company only treats profits transparently on a tax level, a partnership managing assets is much more directly related to the shareholders. In this context, we now consider the preparation of an additional invoice when new shareholders are included in an asset management partnership.

A supplementary invoice means the tax-relevant identification of certain company law connections of an asset management partnership. It serves as proof if neither balance sheets nor other proof of actually changed value ratios, which can be assigned to a shareholder on certain occasions, are provided for or permitted.

However, the technical term supplementary invoice is not found in any of the tax laws that apply to it. In fact, the requirement to draw up a supplementary invoice comes from case law. But there, too, there has been little reason to deal with this topic in more detail. Occasions that lead to the creation of a supplementary calculation occur quite often in practice. Accordingly, the ignorance of the application requirements of shareholders of asset management partnerships is correspondingly great. But many tax consultants are also often unaware of the importance of the supplementary bill.

However, in order to understand more precisely what a supplementary calculation actually is, we should first examine when to make it. For this we look back again a few lines. There we already mentioned that the supplementary invoice is related to the presentation of company law relationships, especially in asset management partnerships.

The trigger for the creation of a supplementary invoice is the inclusion of a new shareholder. If a new partner joins a partnership managing assets, he also takes over part of the managing assets with his share. However, the costs of the new shareholder associated with entering the company must also be taken into account. And this is exactly why a supplementary invoice is created for new shareholders. Thus, the supplementary account basically fulfills the same function as a supplementary balance sheet. So if an asset management partnership does not draw up balance sheets, then you have to draw up a supplementary account for this.

Let’s take a closer look at this. If a shareholder of an asset management partnership sells his shares, the acquirer usually incurs costs. On the one hand, this can generally be the cost of the purchase over the purchase price. Because this also reveals the hidden reserves in the shares. On the other hand, the new shareholder can also take over a negative capital account. But here, too, the discovery of hidden reserves is basically at work. However, a conversion may also constitute a sale operation. Therefore, a conversion may also give rise to a supplementary invoice.

In any case, the costs borne by the new shareholder to take over the hidden reserves of his shares are a tax-relevant variable. Therefore, the supplementary calculation is proof of the current allocation of the hidden reserves in the acquired shares.

Technical advice for

supplementary account?

The supplementary invoice is therefore the counterpart to the supplementary balance sheet if the latter does not apply due to a lack of accounting obligation. However, there are also some deviations. For example, the supplementary balance sheet is included among other things as a legal requirement in § 6 (5) EStG. On the other hand, there is not a single mention of the supplementary bill in the otherwise so detailed German tax laws. Instead, the supplementary account is to be understood as a logical transfer of the same principles that are also subject to supplementary balance sheets to cases in which an asset management partnership determines the tax profit of its shareholders via a surplus income account. Therefore, the principles binding in this context apply to the supplementary account to the surplus instead of those which govern accounting.

Thus, the supplementary account records the changes in value actually occurring when the shares are taken over, which affect the assets that are in the assets of the collective hand. These assets are then divided, for example, the acquisition costs of a new shareholder. Costs which do not constitute an actual economic burden for the new shareholder are not taken into account. This also includes the fact that the position of a fully liable partner must not in itself have any relevance in the preparation of the supplementary invoice. If, for example, the takeover of a negative capital account compensates for the hidden reserves acquired in the course of joining the shareholder, the new shareholder does not incur any real costs; The additional calculation would also be balanced.

This also brings us to the purpose of the supplementary calculation. Because this consists in specifying the tax profit determination of the shareholders. For this purpose, one first calculates the tax profit of the partnership quite regularly. In a second step, the supplementary account ensures that the changes in the personal value of the new shareholder caused by the acquisition of the shares are taken into account for tax purposes. For example, this is the case if the acquisition of the shares also entails the right to a new write-down of the shares in real estate assets.

Thus, it is also clear what effects a supplementary account can have on the surplus account. It is a corrective measure to ensure correct taxation at the level of a new shareholder in a partnership. However, this also goes hand in hand with the new valuation of those assets in the overall hands that are attributable to the new shareholder. However, this may only be done if actual changes in value occur when the shares are taken over.

Furthermore, one must therefore also continue a supplementary calculation created in this way. This applies in particular to the depreciation of the assets newly recognised for this purpose. But even in the case of a new change of shareholder through the acquisition of the company shares, which already required the preparation of an additional account, the values affected by this must be further developed. This of course also applies in the case of a real division.

Finally, a note regarding the low level of employment of the case-law regarding the supplementary invoice. So there are certainly still some open questions that need to be clarified when preparing or continuing a supplementary invoice. For example, the Bundesfinanzhof recently clarified an interesting question. It was a question of whether the tax administration could independently modify the division of the real estate values between the seller and the acquirer of such shares for land and buildings built on it. And the verdict was that this was inadmissible. We can therefore be curious to see what impact future proceedings in the tax courts and the Bundesfinanzhof will have with regard to the supplementary bill. The new option model for taxing partnerships by corporation tax may also give rise to this.