The conversion of a GmbH into a GmbH & Co. KG with special consideration of the tax consequences

GmbH:

Company level

Annual net profit before taxes | 50.000,00 €

Business tax calculation:

Trade tax measured amount i.e. from 3.5% | 1.750.00 €

x lifting gear (380 %)

Business tax: | 6.650,00 €

Corporate tax calculation:

Corporate Tax (15%) | 7,500,00 €

Solidarity surcharge (5.5%) | 412.50 €

Tax burden of the GmbH

(wt 6.650.00 + KSt 7.500.00 € + SoliZ 412.50 €): | 14.212.50 €

Tax burden of the GmbH in percent: | 28.43 %

Shareholder level:

net profit before taxes: | 50.000, 00 €

Dec. Tax burden: | ./. 14.212.50 €

Distributable profit: | 35,787.50 €

Withholding tax (25% x 35,787.50 €): | 8,946.88 €

Solidarity surcharge (5.5% x 8.946.88 €): | 492,08 €

Tax burden of shareholders: | 9.438, 96 €

Total tax burden in %: | 18.88%

GmbH & Co. KG:

Company level

Net profit before taxes: | 50.000,00 €

Exemption for partnerships: | -24,500,00 €

Taxable profit: | 25.500,00 €

Business tax calculation:

Business tax measured amount i.e. v. 3.5%: | 892,50 €

x lifting gear (380 %)

Business tax: | 3,389,60 €

Total tax burden of GmbH & Co. KG in percent: | 6.78 %

Shareholder level:

Income tax (personal tax rate 45%):

25.500.00 € * 45 %: | 11.475.00 €

Value added tax

(Acknowledgement of 4.0 times the weight of the measured amount[63] i.e. v. 892,50 €): | ./. 3,570,00 €

Income tax after crediting: | 7,905,00 €

Solidarity surcharge 5.5%: | 434.78 €

Total burden of shareholders: | 8.339.78 €

Total tax burden of shareholders in percent: | 16.67 %

comparative calculation at high profit:

GmbH

Company level

net profit before tax | 750.000,00 €

Business tax calculation:

Trade tax measured amount i.e. v. 3.5% | 26.250.00 €

x lifting gear (380%)

Business tax: | 99.750.00 €

Corporate tax calculation:

Corporate tax (15%) | 112,500,00 €

Solidarity surcharge (5.5%) | 6,187.50 €

Total tax burden of the GmbH

(wt 26.250 € + KSt 112.500 € + SoliZ 6.187.50 €): | 144.937.50 €

Total tax burden of the GmbH in percent: | 19.33 %

Shareholder level:

Net profit before taxes: | 750,000, 00 €

Dec. Tax burden: | ./. 144.937.50 €

Distributable profit: | 605.062,50 €

Withholding tax (25% x 35.787.50 €) = | 151.265.63 €

Solidarity surcharge (5.5% x 8.946.88 €) = | 8.319.61 €

Tax burden: | 159.585.24 €

Total tax burden in %: | 21.28 %

GmbH & Co. KG

Company level

net profit before tax | 750,000,00 €

Exemption for partnerships: | -24,500,00 €

Taxable profit: | 725,500.00 €

Business tax calculation:

Business tax measured amount i.e. v. 3.5%: | 25.392,50 €

x lifting set (380%) business tax: | 96.491.50 €

Total tax burden of GmbH & Co. KG in percent: | 12.87%

Shareholder level:

Income tax (personal tax rate 45% x 725,500 €): | 326.475,00 €

Value added tax:

(Acknowledgement of 4.0 times the weight of the measured amount i.e. 25.392.50 €): | ./. 101.570.00 €

EST after credit | 224.905.00 €

Solidarity surcharge 5.5%: | 12.369.78 €

Total burden of shareholders: | 237,274.78 €

Total tax burden of shareholders in percent: | 31.64 %

GmbH:

Annual net profit: | 250.000,00 €

Business tax measured amount 3.5%: | 8.750.00 €

Business tax (lift 380%): | 33.250.00 €

Corporate tax 15%: | 37,500,00 €

Solidarity surcharge (5.5%): | 2.062.50 €

Total tax burden: | 72,812.50 €

Total tax burden in percent: | 29.13%

GmbH & Co. KG:

Annual net profit: | 250.000,00 €

Company level:

Exemption for partnerships: | 24.500,00 €

Profit before taxes: | 225,500,00 €

Company level:

Business tax amount 3.5% | 7.892.50 €

Trade tax lift 380 %: | 29.991,50 €

Shareholder level:

Income tax under consideration

the Thesaurierungbegünstigung (28.25 %): | 63.703.75 €

Crediting of business tax:

Trade tax measurement amount (7,892,50 €) x 4.0 times: | ./.31,570,00 €

Income tax: | 33.133,75 €

Solidarity surcharge: | 1.767.36 €

Total tax burden on company / shareholder level: | 64.892,61 €

Total tax burden in percent: | 25.96%

The conversion of a GmbH into a GmbH & Co. KG may have tax consequences. Since in many different cases it can bring about certain civil and tax advantages, the conversion of a GmbH into a GmbH & Co. KG as a change of legal form is not an exceptional occurrence. But also as a merger you can convert a GmbH into a GmbH & Co. KG. After all, both the GmbH and the GmbH & Co. KG are among the most popular legal forms that are used for companies in Germany. Thus, the consideration of the conversion of a GmbH into a GmbH & Co. KG is of great practical relevance.

Figure 3: The conversion law at a glance ................................................................... 35

Figure 4: Merger of a limited liability company into a partnership 42

Figure 5: Shared real estate transfer tax exemption in accordance with § 5 para. 2 GrEStG .......45

para. – paragraph

Dec. – minus

AktG – Aktiengesetz

AO – Tax Code

AStG External Tax Act

Edition – Edition

BBK – accounting, balance sheet, cost accounting trade journal

BewG – Valuation Act

BGB – Civil Code

BGBl – Federal Law Gazette

BGH – Bundesgerichtshof

BGHZ – Federal Court of Justice decisions in civil matters

BFH – Bundesfinanzhof

BMF – Federal Ministry of Finance

BStBl – Bundessteuerblatt

BT pressure. – Bundestag printed matter

or – or

approx.

Co. – Compagnie

DB – The holding journal

Dr. – Doctor

DStJG – German Tax Law Society

DStR – German Tax Law Journal

DStZ – German tax newspaper

EBITDA – Earnings before Interest, Taxes, Depreciation and Amortization

ErbStG – Inheritance Tax Act

ESt – Income Tax

EStG – Income Tax Act

EStDV – Income Tax Implementation Regulation

excl. – exclusive

f. – following

ff. – following

GbR – civil law company

according to

GewSt – Business Tax

GewStG – Business Tax Act

GmbH – Limited Liability Company

GmbHG – GmbH Act

GmbHR – The GmbH-Rundschau

GrEStG – Real Estate Transfer Tax Act

HGB – Commercial Code

Edited – Editor

HS – half set

generally

iH.v. – in the amount of

incl. – included

InsO – Insolvency Regulation

InVStG – Investment Tax Act

i.S. – in the sense

i.V. m. – in conjunction with

KG – limited partnership

KGaA – limited partnership on shares

KöMöG – Law for the Modernization of Corporate Tax Law

KSt – Corporate Tax

KStG Corporate Tax Act

MDR – Monthly for German Law

MoMiG – Law for the modernization of GmbH law and the fight against

Abuses

No – Number

NWB – National Business Block Journal

OHG – Open Commercial Company

OLG – Higher Regional Court

Prof. – Professor

paragraph 21. - Reduction

RG – Reichsgericht

RGZ- Judicial Court in Civil Matters

RStBl – Reichssteuerblatt

Reciprocal number

SEStEG – Law on tax accompanying measures for the introduction of the European

Company and amending further tax legislation

SolZ – Solidarity Surcharge

StUW – Tax and Economics

StGB – Criminal Code

Tz. – sub-digit

UStG – VAT Act

UmwG – conversion law

UmwStG – Conversion Tax Act

UmwStE – conversion tax waiver

v. – from

cf. – compare

e.g. – for example

ZGR – Journal for Enterprise and Corporate Law

The legal form of the GmbH has been considered the preferred legal form in Germany for years. In 2020 alone, there are about 764,904 corporations, but this also includes the corporation. Partnerships with the legal forms of an open commercial company or limited partnership existed in Germany in 2020 to about 405.500. [] 1]

Already at the start of the company, it is of great importance for which legal form the persons involved in the planned company decide. Here, tax, civil, business and inheritance-related aspects must be subjected to a detailed examination. Even if this was clarified very carefully when the company was founded, restructuring can occur over the years of activity. Above all, the constant change in the market and the crises to be overcome make entrepreneurs think about whether the legal form chosen at the establishment continuously meets the internal but also the external current conditions.

If an existing corporation in the form of a GmbH has to be converted into a partnership in the form of a GmbH & Co. KG, the same questions have to be clarified as when starting a company. Civil, tax, business and inheritance aspects must be examined. The subject of this work is, among other things, to clarify these points. What civil law matters should be observed? How should a capital company be converted into a partnership? In the case of inheritance, can already

be reacted in advance so that the succession is secured?

When converting a corporation into a partnership, however, the tax consequences must above all be taken into account. Does conversion lead to the discovery of hidden reserves? Can the conversion also be tax-neutral? And if so, is this always the most advantageous variant under tax law according to constant tax recommendations? Which aspects are to be considered in the context of a tax consultancy in connection with such a conversion process and, if necessary, weighed against each other?

In order to find out these key questions, a fundamental analysis of the civil and tax situation of the two companies is first necessary. First, the legal foundations of the GmbH are explained and how this is to be assessed in terms of liability but above all tax. After discussing these legal bases, the motives follow. Why should entrepreneurs decide to convert a GmbH into a GmbH & Co. KG? In addition to the tax motives, which are illustrated by calculation examples, the inheritance-related reasons are also examined.

Before examining the process of converting a GmbH into a GmbH & Co. KG in the subsequent work, the basic features of the Conversion Act and the Conversion Tax Act must first be specified. It shall identify the necessary paragraphs to be used for the conversion.

In the further course of the work, the possibilities of legal form conversion are then listed and which different phases the entrepreneurs have to go through during the conversion.

This is followed by the tax assessment of the conversion. On the one hand, the tax consequences for the GmbH are discussed. What is to be considered within the final balance sheet of the GmbH? How is a takeover result determined? What is the tax retroactive effect and what happens if a shareholder leaves the company during this time or profit distributions still flow?

On the other hand, the consequences of tax law in relation to GmbH & Co. KG are analysed. What is the opening balance sheet and is real estate transfer tax levied if a property is transferred from the GmbH to the GmbH & Co. KG? Meanwhile, the trade tax effects of the conversion are also described. Specifically, the blocking period is discussed here and in which cases it can even lead to a blocking period violation.

In the final point of the drafting, the new section of the Corporate Tax Act, § 1a KStG, is addressed and what impact this option of the commercial companies could have on this conversion. What is the impact of the corporate taxation option, especially in relation to the above-mentioned blocking periods?

Before the transformation of the GmbH into a GmbH & Co. KG can be discussed in detail, the basic legal requirements of the participating legal entities must first be explained.

In order to make a positive decision on the choice of legal form, several factors must be taken into account. In addition to the tax consequences of a change of legal form, civil law aspects must also be mentioned. Particular emphasis should be placed on liability relationships or internal organizational processes such as management matters. [] 2]

2.1.1 General legal basis

As a corporation, the GmbH is a legal entity under civil law. As a legal entity, the GmbH constitutes its own legal personality. It shall be independent and legally competent. Thus, she can be the holder of rights and obligations and, for example, act as an employer or contractual partner. The GmbH itself may also be the owner of fixed assets, such as land, buildings, fleet, operational inventory or intangible assets. It also acts as a debtor for liabilities and as a creditor for claims, cf. § 13 para. 1 GmbHG.[3]

In contrast to a partnership, the focus here is not on the shareholders, but on their capital participation. [] 4]

For the legal form of the limited liability company, an independent law, the GmbH law, was enacted already in 1892. It was only in 2008 that the “Law for the Modernization of GmbH Law and the Fight against Abuses” took place. [5] As a result of the adaptation of the GmbH Act, in addition to the establishment of a limited liability company, the possibility of establishing a corporate company (limited liability) with its own special regulations arose. Since the entrepreneur company (haftungsbeschränkt) is not discussed further in this work, the corresponding special regulations will not be discussed in more detail below.

The company with limited liability, GmbH for short, is a so-called corporation. The legal basis can be found in the GmbH law. However, as a capital company, the GmbH also constitutes a commercial company under the Commercial Code. Corresponding statutory provisions, for example on conversions, are therefore determined by the Handelsgesetzbuch, HGB for short, in accordance with § 274a i.V. m. § 276 i.V. m. § 288 HGB.

This form of company is characterized by the share capital, which is entered in the commercial register. The legal basis of the commercial register can be found in §§ 8 ff HGB. Accordingly, the commercial register is an electronically operated register by the courts according to § 8 para. 1 HGB. A GmbH must be registered in the commercial register in whose district the registered office is registered according to § 7 Abs. 1 GmbHG.

The share capital is regulated in § 5 GmbHG. This must be at least 25,000.00 euros, according to § 5 Abs. 1 GmbHG. The share capital is provided by the respective shareholders of the GmbH. Each shareholder thus receives a share of the business. This must be in accordance with § 5 Abs. 2 GmbHG denominated in full euros. The business share can be provided in cash or in kind.

If a shareholder does not make his fixed parental contribution, there may be a caduction, a forced exclusion of the GmbH shareholder from the company, according to § 21 para. 2 sentence 1 GmbHG.[6] Consequently, the affected shareholder loses all rights and obligations associated with the share.

The social contract is subject to the legal obligation of the notarial form.[7] In addition, this requires the signature of all partners in accordance with § 2 Abs. 1 GmbHG.

Minimum elements of the social contract are in accordance with § 3 para. 1 GmbHG the company's company, the indication of the registered office, the object of the company, the indication of the share capital and the list of shareholders together with nominal amounts of the shares. [] 8]

The registered office must be located in Germany according to § 4a GmbHG.

The name of the company must always indicate the designation "Company with limited liability", or for short "GmbH", according to § 4 GmbHG.

The capital company can only be registered in the commercial register if a quarter of the nominal amounts of the individual shares have been paid. Overall, however, the share capital must reach at least half of the share capital for registration. Deposits in kind shall be made available immediately, cf. § 7 para. 2 and para. 3 GmbHG.

The GmbH must also appoint at least one managing director.

The managing director is to be entered in the commercial register in accordance with § 39 GmbHG. The registration has a declaratory and thus a proclamatory effect. He has according to § 39 Abs. 3 GmbHG to ensure that the aforementioned conditions are met. [9]

Why the GmbH has gained popularity in the choice of legal form in the past is due to the advantages that limited liability has. The shareholders of the GmbH are not liable to third parties with their private assets. In principle, it is liable for the assets of the company, in accordance with § 13 para. 2 GmbHG. This is a major difference to most partnerships. In the case of a partnership of the HGB or the BGB, the shareholders are usually also liable with their private assets. Exceptions are only to be found in the statutory provisions of the liability of the limited partners of a limited partnership, according to § 161 para. 2 HGB.

Tax liabilities of the GmbH or debts towards the social insurance institutions can also lead to personal liability of the managing director. However, the prerequisite here is that these result from a grossly negligent act, according to § 6 Abs. 5 GmbH G i. V. m. § 34 and § 69 AO.[10]

A breach of the obligation to file for insolvency pursuant to § 15a InsO or a deliberate infringement of legal interests pursuant to § 823 BGB i.V. m. § 15a InsO also leads to personal liability of the managing director.

Figure 1: Liability at the GmbH

Source: Jula, R. Der GmbH Partner, 2004, page 3

The popularity of the GmbH is also due to the freedom of design in the internal relationship. Due to the design freedom set out in the GmbH Act, the shareholders are able to adapt the internal relationship far and wide.

Even at the time of founding, the GmbH has greater scope for design. Thus, in the case of a partnership, the purpose must be directed to the commercial sector, in accordance with § 105 HGB. Unlike the GmbH, here the purpose of the commercial trade must only be permitted. Among other things, artistic activities can also come to the foundation of a GmbH.

Another advantage of founding a GmbH is the possibility of establishing a one-man GmbH. A partnership must always consist of at least two partners.

In addition, independent third parties can be appointed and hired as managing directors. The managing director does not have to be a shareholder of the GmbH. Also, a shareholder can reduce his personal liability risks by not taking over the tasks of a managing director.

Even a possible change of shareholder is much easier at the GmbH than at a partnership. According to § 15 Abs. 3 GmbHG requires a notarized contract for the departure of the shareholder. The departure of a shareholder leads to the assignment of company shares, according to § 15 Abs. 1 GmbHG. In this way, the shareholders can also sell their shares in the company.

The statutory provisions, in the third book of the HGB, contain the central rules of accounting for the annual accounts of a GmbH, such as the establishment periods and regulations for examination and disclosure, §§ 238-342e HGB.

2.1.2 Tax bases

Since the GmbH is a corporation as defined in § 1 KStG and thus the shareholders are not prosecuted as personalities of the company, tax law also requires strict independence in taxation. The company assets are not allocated to the shareholders. As a capital company, the GmbH constitutes an independent legal entity and is thus based on the separation principle. It is subject to corporate income tax in accordance with § 1 Abs. 1 No. 1 KStG.[11]

For the purposes of the HGB, the GmbH is a corporation as form merchant, § 6 Abs. 1 HGB, § 13 Abs. 3 GmbHG, for the management of books according to § 238 Abs. 1 HGB obligated. In addition to commercial law, tax law in § 140 AO covers the obligation to keep accounts. There it is said that those who, apart from tax laws, are obliged under other laws to keep books that are meaningful for taxation, so is this obligation for taxation. [] 12]

As a corporation, the GmbH is liable for unlimited corporate tax if its management or headquarters is located in Germany, cf. § 1 para. 1 KStG. This unlimited corporate tax liability thus extends to all income of the company, according to § 1 para. 2 KStG.

Foreign corporations whose management is located in Germany may also be subject to unlimited corporate liability in Germany if, in a type comparison procedure, it appears that the corporate structure is comparable to a domestic corporation. [] 13]

Corporations which do not have their registered office or management in Germany are subject to limited taxation pursuant to § 2 No. 1 KStG. Only their domestic income is subject to corporate tax.

Already with the conclusion of the notarial social contract i. S. of § 2 GmbH begins the tax liability for the GmbH.[14] Until the registration in the commercial register, the GmbH is considered as Vor-GmbH.[15]

Basis of assessment for the determination of corporate tax is the taxable income within one year according to § 7 para. 1 and para 3 KStG. If a marketing year deviates from the calendar year, the end of a marketing year is decisive for the taxation of the profit.[16] § 7 para. 2 KStG provides information on the composition of the taxable income. The definition is therefore the income of the GmbH according to § 8 Abs. 1 KStG taking into account the allowances pursuant to §§ 24, 25 KStG.[17]

Companies with the legal form of a GmbH achieve according to § 8 para. 2 KStG i.v. m § 1 no. 1 to 2 KStG Commercial income. The profit of a GmbH is to be made by determining the comparison of operating assets.

taxable income basis i. S. corporation tax is thus profit. The requirement for profit determination is the profit and loss statement. The determination of the annual profit by applying the profit and loss account is linked to the provisions of § 4 EStG, cf. § 8 para. 1 sentence 1 KStG. 18)

If amounts or receipts within the balance sheet do not correspond to the tax regulations, they must be adjusted in accordance with the tax regulations, cf. § 60 para. 2 sentence 2 EStDV.

The taxable income of a GmbH is based on the profit or loss on the tax balance or on the adjusted annual profit or loss. Annual deficit according to § 60 Abs. 2 EStDV according to the trade balance plus profit adjustment due to possible hidden profit distributions ag. § 8 Abs. 3 sentence 2 KStG.

The definition of a hidden distribution of profits is the granting of an asset advantage to a shareholder by the GmbH or corporation outside the defined distribution of profits. Also grants to related parties of the shareholder fall under the hidden distribution of profits. A donation is referred to as a benefit if the advantage had not been granted to a third party under otherwise identical circumstances by the use of careful and conscientious management.[19] Simply speaking, one also speaks here of a reduction in assets or a prevented increase in assets, caused by the social relationship.

From the profit or loss plus the previously defined hidden profit distributions, increases in profit that affect the previous investment period are deducted. In addition, corrections pursuant to § 1 AStG must be made. Corrections in accordance with § 1 AStG here are reductions in the income of a shareholder arising from a foreign business relationship with a person close to him. If these reductions have arisen as a result of conditions other than those which would have been met by an independent third party, they must be corrected and thus adapted to the arm's length principle. The corrections under § 1 AStG are to be added to the profit or loss of the company, see § 1 para. 1 AStG. Deposits in accordance with § 4 para. 1 sentence 8 EStG, such as cash deposits or other assets, are to be reduced from the profit. Non-deductible operating expenses according to § 4 Abs. 5 EStG or according to § 10 KStG are added. This includes, for example, the business catering of persons over the appropriate share of 70%, see § 4 para. 5 sentence 1 no. 2 EStG or 50% of the remuneration to members of the supervisory/administrative board or to persons in a similar position, cf. § 10 no. 4 KStG. In addition, the grants for the promotion of tax-advantaged purposes according to § 9 para. 1 No. 2 KStG i. V. m. §§ 52 to 54 AO. The deductible portion up to an amount of either 20 percent of income or 4 per thousand of the sum of total sales and annual wage expenses is subtracted again in the later course. To determine the tax profit or income of the corporation according to § 9 para. 2 sentence 1 KStG are now still the additions or reductions according to § 8b KStG, § 3c para. 1 EStG. This includes, for example, profits from the sale of shares in a corporation, cf. § 8b para. 2 KStG, and expenses which are economically related to tax-free income, see § 3c para. 1 EStG. Other domestic tax-free income such as investment allowances, as well as reductions or additions to foreign income also remain out of the income assessment approach. One according to § 4 para 6 and 7 or according to § 12 para. 2 sentence 1 UmwStG takeover loss not to be taken into account is added. A takeover profit that cannot be taken into account is reduced in return. After taking into account the non-deductible losses still to be added pursuant to § 8 Abs. 4 sentence 4 or according to § 13 para. 3 KStG or reduction of the same profits and corresponding profit surcharges according to § 6b para. 7 and 8 EStG or §7g Abs. 5 EStG results in the tax profit or income in accordance with § 9 para. 2 sentence 1 KStG of the limited liability company. The total amount of income thus results after reduction of the deductible grants according to § 9 para. 1 No. 2 KStG. If the company still has an open loss deduction according to § 10d EStG, this is now to be taken into account. The income reduced by any allowances for certain corporations according to § 24 KStG now results in the taxable income.

The legal form of GmbH & Co. KG enjoys an unbroken favourite on the market. This can essentially be justified because the advantages of a partnership can be combined with those of a corporation in the form of a GmbH & Co. KG. [] 20]

Even the decision of the Reichsgericht of 04.07.1922 no longer expressed any objections against the legal recognition of this type of partnership. [21] The Federal Court of Justice also later declared the recognition of GmbH & Co. KG admissible. [] 22]

2.2.1 General legal basis

The GmbH & Co. KG is in accordance with § 161 para. 1 HGB a partnership. The purpose of the company is to operate a commercial trade directed under a joint company. According to § 19 HGB, in the company name the connection “GmbH & Co. KG” must be named.

Liability towards creditors is limited to the capital contribution of some shareholders, or at least one shareholder, GmbH & Co. KG. These are the so-called limited partners. The liability of the personally liable partner, the so-called general partner, is unlimited. [] 23]

In this form of company, the unlimited partner, the general partner, can nevertheless be a legal person. In this case, a corporation in the form of a GmbH. Thus, despite the present partnership, the personally liable partner is a GmbH. It is therefore not possible in this form of company to rely on the assets of natural persons. The GmbH is only liable with your existing assets. As a rule, this is the share capital i.e. v. € 25,000. For the limited partners there is a limitation of liability i.e. the amount of liability to be entered in the commercial register. However, this only applies to external relations. Deviating regulations can be made in the internal relationship. [] 24]

It should be emphasized that this form of company achieves that all private assets of all shareholders who stand behind the GmbH & Co. KG remain protected.

Figure 2: Liability of GmbH & Co. KG

Source: own image

In addition to the liability regulations, the representation powers of the limited partnership here are not to be compared with those of other personnel companies, such as an OHG or a GbR. As a rule, partnerships are subject to the Community power of representation. Each shareholder is entitled to both representation and management in the external relationship. At the KG, however, only the general manager is entitled to represent. In the case of the legal form GmbH & Co. KG, the GmbH is thus authorised as a legal person to represent the company and manage the business. It acts only through its bodies, such as the managing director to be appointed. This can be a shareholder of the GmbH, a limited partner or a third party. [] 25]

The limited partners are excluded from the management, but have a right to object. However, this right of objection applies only to undertakings carried out by the management outside the ordinary business operation. In such undertakings the consent of the limited partners is required, cf. §§ 164, 116 para. 2 HGB. If the same shareholders are represented in identical shares at Komplementär-GmbH as well as at the limited partnership, the present much more influential legal status of the GmbH has no effect. The influence on the company lies uniformly with the same shareholders. [] 26]

In the event of a non-existing personal identity within the shareholders and their shares, Komplementär-GmbH can consciously be used as a design instrument for managing the limited partnership.

In order to establish a GmbH & Co KG, it is absolutely necessary to establish the GmbH in accordance with § 2 para. 1 GmbHG by notarized GmbH contract. What other requirements for the establishment of a GmbH i.S. of § 3 Abs. 1 sentence 2 GmbHG must be available and how the founding process proceeds, has already been explained in more detail in the process of work. Already with the notarized conclusion of the contract and before the registration of the GmbH in the commercial register, the so-called Vor-GmbH is created. Already as an existing Vor-GmbH, the company can be used as a general partner of the GmbH & Co. KG. The limited partnership must also be entered in the commercial register. This can already be done with the Vor GmbH as a complementary.[27], [28] It should be noted, however, that the GmbH with its full limited liability on the company assets only becomes effective upon registration in the commercial register. [] 29]

For the GmbH & Co. KG, a company object as detailed as possible must be specified, according to § 8 para. 1 sentence 6 GmbHG. An indication of the purpose of the company ensures that the activities of the directors are in the specified field of activity. The social contract drafted by the shareholders thus specifies the radius of movement of the management. By means of registration in the commercial register, the register court has to check whether the object of the company additionally requires approval. Formulations of the object of the company which indicate a trade in goods of any kind or merely the operation of a commercial transaction are not approved.[30] In 1996, the Bavarian Higher Regional Court initially decided that the object of the company of the general manager-GmbH must also show components of the KG's activities.[31] However, since the GmbH does not carry out its own business operations, but only acts as Managing Director of the KG, this is nowadays justified regularly rejected. Komplementär-GmbH is liable indirectly with its assets for its activities as Managing Director of the KG. With its own corporate purpose, these foreign business activities would be qualified as proprietary business and thus undermine the legal independence of the GmbH. The sole purpose of the GmbH is to act as a general partner of the KG. Although it is possible to run an own business operation in addition to the complementary position of GmbH & Co. KG, this is usually not the case. For the operational area, the share capital of the GmbH is therefore not affected. The limited partnership pays for any costs incurred by the GmbH. The company assets of the GmbH thus generally remain untouched. [33]

2.2.2 Tax bases

The GmbH & Co. KG was not recognized under tax law for a longer period of time, so that there was a double tax burden. The profits were allocated to Komplementär-GmbH. As a result, the profit was claimed with the corporation tax. Thus, the partnership form was treated by the Reichsfinanzhof as a GmbH. The Reichsfinanzhof justified this tax treatment by the fact that GmbH & Co. KG was used as a variant for circumventing taxes. [34] Only about seven years after the legal recognition of 04.07.1922 was it declared by the judgment of 13.03.1929 by the Reichsfinanzhof that in addition to the tax reasons also economic reasons exist for the establishment of a GmbH & Co. KG. This assessment was also supported by the judgment of 18 February 1933.[36] The previous assumption that the choice of a GmbH & Co. KG is only made for tax avoidance was not denied, but the possibility of tax savings was recognized.[37] Ultimately, the judgments were reviewed again by the Bundesfinanzhof, so that at the latest with the judgment of 16.09.1958 the GmbH & Co. KG can also be regarded as a tax-recognized personnel company. [] 38]

Income tax is the GmbH & Co. KG with the exercise of commercial activity. Whether the social contract or the entry in the commercial register have already been concluded in advance is irrelevant from a tax point of view. [39] Only the business activity as a legal entity is decisive for the start of the tax-relevant co-entrepreneurship. However, a co-entrepreneurship already exists between the future shareholders of GmbH & Co. KG as soon as they undertake anticipated and preparatory actions in relation to the establishment of GmbH & Co. KG, for example in the form of anticipated operating expenses, such as the payment of the notary. The emergence of the co-entrepreneurship as such and the tax emergence of the company must therefore be assessed independently of each other in time.

Due to the qualification of the real partnership, the legal form lacks the property of the tax subject for the taxation of income and corporate tax, cf. § 1 KStG, § 1 EStG. The status as a tax debtor in the sense of the business, sales, wage, real estate transfer tax remains unaffected. [] 40]

The income earned by the partnership is not allocated to the GmbH & Co. KG, but proportionally to the individual shareholders. In the case of limited partnerships, which are usually natural persons, the pro rata profits are subject to income tax. In the case of legal persons, in this case the Komplementär-GmbH, the profit share income tax is taxed with the corporation tax.

Business tax law applies according to § 2 para. 1 GewStG the GmbH & Co. KG as an independent tax entity, insofar as it is operated as a business unit in Germany.

In tax law, a partnership is called a co-entrepreneurship.[41] Even if this tax name is used for the partnership, this does not mean that both terms are to be understood identically. For the existence of a co-entrepreneurship, the following tax criteria must be met: The co-entrepreneur risk and the co-entrepreneur initiative.

If a shareholder participates in the profit or loss and in the assets of the company, he assumes an entrepreneurial risk. Especially if he is a shareholder in the hidden reserves. This includes, for example, also intangible assets such as the company value. [] 42]

According to §§ 162 ff. HGB shareholders in the profit and loss of the limited partnership. Losses are offset only up to the amount of their capital share and the backward contribution, see § 167 para. 3 § HGB. According to § 15 Abs. 1 no. 2 EStG is equal treatment between the limited partners and complementaries. The requirements of the co-entrepreneur risk are fulfilled for the legislator with these legal regulations.

If a shareholder participates in a foreign trade by means of a capital contribution and this only in the form of a silent participation i. S. §§230 ff HGB, the prerequisites for a co-entrepreneur risk are not justified. The profits of a silent participation are made in accordance with § 20 Abs. 1 no. 4 EStG and thus allocated to income from capital assets.

The following aspects must therefore be questioned as to whether the co-entrepreneur risk is assumed: Is the shareholder involved in the company income? If there is a loss participation, according to § 167 Abs. 2 HGB? Is the participating shareholder also a shareholder in a liquidation proceeds?[43] If the points of view are correct, there is an atypical silent participation, which is involved in the assets of the company and thus constitutes a joint venture risk assumption. [44]

limited partners are excluded from the management according to § 164 HGB and cannot object to various business actions of the general partner. Excluded from this, however, are acts of the personally liable partner that go beyond the usual business operations of the company. In accordance with § 166 Abs. 1 HGB also entitles you to request access to the books, to view the annual accounts or to examine papers.[45] These are minimum requirements that give rise to a right of vote, control and objection and thus have a special influence on decisions within society. The tax criterion of the co-entrepreneur initiative to establish a co-entrepreneurship is fulfilled under the circumstances. If regulations have been made within the limited partnership’s articles of association which, in contrast to the statutory provisions, provide for restrictions on limited partnerships and are thus, for example, denied the right to object, these regulations can lead to the loss of the joint entrepreneur initiative. [46]

If a shareholder meets the requirements of the co-entrepreneur risk and the co-entrepreneur initiative, he is to be regarded as a co-entrepreneur under tax law. If there are two or more co-entrepreneurs, there is a co-entrepreneurship.

A co-contractor under tax law can, however, also be who is not a shareholder of GmbH & Co. KG under company law, taking into account the tax criteria. In tax law, only the participation provisions that a person holds apply. If a person who is not a shareholder has special rights of co-determination or opposition on the basis of agreements made elsewhere and is also a shareholder in the entrepreneurial risk of GmbH & Co. KG, this person may be a co-entrepreneur under tax law.[47]

A tax co-entrepreneurship is thus to be assessed according to whether the legal status of a person corresponds to or approximates the standard statute of a shareholder of a limited partnership.[48], [49] In terms of tax, it is not relevant whether the GmbH & Co. KG has a commercial character or acts commercially. These are not prerequisites for co-entrepreneurship.

In addition, the loss offsetting at GmbH & Co. KG must be observed for tax purposes. In principle, an analogy can be recognized between the loss offsetting of a GmbH and that of a GmbH & Co. KG. In the case of a negative balance on the capital account of a limited partner, however, § 15a Abs. 1 EStG to be observed. Accordingly, losses from loss offsetting are not offset against other income of the limited partner from other types of income. Thus, a deduction prohibition in accordance with § 10d EStG applies.

The losses of the limited partner, which according to § 15a para. 1, i.e. para 1a EStG may not be offset against income from other types of income, but lead to a reduction in the profits that will flow to the limited partner in the future. [51] The possibility to reduce the pro rata profits is not subject to any time limit and can be used for previous years as well as subsequent years. Therefore, this regulation is contrary to § 10d EStG.

When choosing the legal form, the entrepreneur is offered various legal forms by the prevailing legal system, which can be useful for the management of the company. In addition to the sole proprietorship, the entrepreneur can also decide between the partnership and the corporation. Over the course of the company years or through a possible planned company transfer, the question of the correct legal form can be repeated. A conversion of an existing company is usually characterized by personal preferences of the current shareholders. [52] Decisive for a change of legal form can be, for example, the liability relationships for the company succession or financing reasons. In addition to business factors, tax factors also play a major role. [] 53

In the first step, a planned conversion of companies is a process that is of high relevance under corporate law. A conversion can arise under company law due to change requests within the corporate legal form and also due to existing corporate relationships, which would be adapted to better conditions by a conversion. As part of the law merger on 01.01.1995, the conversion law was cleaned up. This resulted in up to 75 possibilities for conversion. [] 54]

There may be different tax consequences depending on the corporate law structure of a conversion from a GmbH to a GmbH & Co. KG.

Depending on the case design, the legally applicable tax bases, which are enshrined in the tax laws, must in principle be applied.

However, the principles of conversion tax law are to be applied as a priority. [] 55

From a tax point of view, a company conversion should be planned in such a way that it does not lead to the discovery and realisation of the hidden reserves in order to avoid taxation of them. The conversion tax law includes corresponding conversion possibilities to make the conversion as revenue-neutral as possible. Should a so-called “spherical change” take place in the course of a conversion, there will be a change from a company subject to corporate tax, here a GmbH, to a partnership, here a GmbH & CO. KG, which is subject to personal profit taxation at shareholder level.

In tax law, partnerships and corporations have different valuations. [56] As already explained, the principle of separation prevails for limited liability companies. In the case of partnerships, however, the principle of transparency applies. This means that the income is directly attributed to the shareholders. At the latest with the reform of corporate taxation in 2008, all tax advantages that would have led to the conversion of a GmbH into a GmbH & Co. KG have been neutralized. As a result of this reform, the total tax burden of a partnership, such as a GmbH & Co. KG, was adjusted by means of a tax relief package of the accumulated profits. This adjustment compares the tax burden of a partnership with that of a limited company. [57] It is also noteworthy that this reform set the trade tax figure for calculating the trade tax amount uniformly at 3.5%. Previously, this was calculated by a staggering regulation of 1% to 5%. [58] Also, the crediting of trade tax in accordance with § 35 EStG has been increased to 3.8 times as part of the 2008 corporate tax reform (from 2020: 4.0)[59]. Previously, this crediting amounted to only 1.8 times the trade tax measurement amount. If the lifting rate of a municipality is at least 380%, this leads to a complete trade tax relief for the shareholder as part of his personal determination of the income tax. [60]

Inheritance tax adjustments were also made through the tax reform to inheritance tax in 2008. Previously, a shareholder of a personnel company, such as GmbH & Co. KG, could use the value of the tax balance sheet in the estate tax return as the basis for assessment. At that time, contrary to this, in the case of a limited company, it was only possible to obtain the common value in accordance with § 11 para. 2 Use BewG for the assessment basis. The common value was in principle to be determined from the sale of comparable shares from the year before the fall of the inheritance. If there were no comparisons, the

Value determined using the calculation according to the Stuttgart method. The Stuttgart procedure determined the value according to the prospects of the yields of the next three years. The assessment basis of a share in a well-running limited company thus led to a higher value than for partnerships. With the adaptation of the inheritance tax reform in 2008, uniform rules now apply, which establishes a neutrality of the valuation of shares between the legal forms. According to § 199-203 BewG, the value of operating assets must now be calculated according to the simplified income value method. The decisive factor for the determination is the annual tax surplus or Profit generated by the partnership or corporation. According to § 203 Abs. 2 BewG, taking into account the base rate and the lump-sum premium, the capitalisation factor is calculated. [] 61]

The conversion of the GmbH into a GmbH & Co. KG does not have an advantage in the sense of inheritance tax. Nevertheless, it may be useful in the gift and inheritance tax area to carry out such a conversion. The conversion can, for example, avoid a high tax burden at the time of death of the decedent. [62] This process is particularly useful for so-called family businesses. The future heirs can join the GmbH & Co. KG as limited partners at an early stage and thus successively carry out capital transfers. This happens without the heirs having any direct participation in society. If the assets of GmbH & Co. KG are partly transferred to the limited partners as future heirs, tax exemptions may be granted. S. §14 ErbStG can be used more than once. An entitlement to the allowance according to §14 ErbStG exists according to the statutory regulations every ten years. It is also possible to avoid taxation of future hidden reserves due to possible increases in the value of the company in subsequent years, since the potential heirs are involved in the company at an early stage. If there is actually an increase in the value of the company at the time of the death of the decedent and the heirs are not involved as limited partners at that time, there is an increased tax burden due to the higher company value. In terms of inheritance tax, the early conversion of the GmbH into a GmbH & Co. KG can thus be advantageous, since this reduces the tax burden.

When, however, it can also make sense for tax purposes to convert a GmbH into a GmbH & Co.

Converting KG? This is illustrated by the following figures. The figures contain examples of tax calculations under the specification of a full distribution of the profit. For reasons of simplification, the examination of whether the income thresholds for the obligation to pay the solidarity surcharge are lowered is waived. The payment of the solidarity surcharge shall be imputed. In addition, at the shareholder level, a personal tax rate of 45% is assumed:

comparative calculation at low profit:

The total tax burden of a GmbH & Co. KG is always lower than that of a GmbH. This is based on the fact that a corporation is liable to corporate tax in addition to trade tax. GmbH & Co KG as a partnership, on the other hand, is not subject to corporate tax under tax law.

However, if one considers the shareholder level and assumes a full distribution of the profits, the partnership is only tax cheaper for a lower profit.

Based on the calculations, it can be seen that the change into a partnership makes sense as long as the company moves in the low-profit sector.

If the company achieves high profits, the total tax burden of the shareholders at the GmbH is lower compared to the GmbH & Co. KG.

From this it can be concluded that if the income of the shareholders or the personal marginal tax rate increases, the tax advantages of the partnership decrease. The higher the profit, the higher the marginal tax rate and the tax advantage compared to the corporation decreases. High profits of the company therefore mean that the advantage, from the point of view of the shareholders, of converting a GmbH into a GmbH & Co. KG no longer exists. [] 64

However, there are other possibilities at GmbH & Co. KG besides the full distribution of the profit. The 2008 corporate tax reform also stipulated that partnerships no longer have to distribute their profits in full, but can save them within the company. The advantage here is the particularly favourably fixed tax rate of 28.25%. Profits that have not been taken out of the company are thus subject to the recovery advantage. However, this can only be granted at the request of the shareholder. A prerequisite for claiming this advantage is that a limited partner has a share of at least 10% or this has a value of at least 10,000 euros. If the conditions are met and the thesaurierungstarif applies, the calculated profit is taxed at the shareholder level, with the favourable tax rate of 28,25 % income tax, according to § 34a EStG. This is also referred to as the profit benefiting from the accumulation. The pre-tax profit minus the profit benefiting from the restitution gives the unfavourable share of the profit, which is taxed at the personal income tax rate of the shareholder or limited partner. On the non-beneficial portion, which is to be taxed with the personal tax rates, the trade tax according to § 35 para. 1 No. 2 EStG i.e. of 3,8 times the trade tax measurement amount. It should be noted here, however, that the trade tax is limited only proportionally to the trade tax, which was actually incurred by the company. Also to be observed is the maximum amount of the reduction in accordance with § 35 Abs. 1 No. 2 sentence 2 EStG. The tax burden at the shareholder level thus results from the income tax due taking into account the savings tax and the proportional income tax burden taking into account the personal tax rate, as well as the solidarity surcharge, reduced by the offsetting of the business tax. [65] Whether the solidarity surcharge is incurred depends on the personal taxable income. If this is more than 96.409 € for single persons or more than 192,818 € for spouses, a solidarity surcharge is set. [] 66

In order to illustrate the advantage of the condensation advantage, a comparative calculation between the GmbH and the GmbH & Co. KG also follows:

Calculate the total tax burden in percent based on the reduced profit of € 225,500,00, including the allowance according to § 11 para. 1 sentence 3 no. 1 GewStG for partnerships, then one arrives at a percentage i.e. 64.892.61 € x 100 / 225.500.00 € = 28.78 %. Due to the possibility of full taxation and the introduction of the tax relief according to §34a EStG, the tax burden of the GmbH is comparable to the tax burden of the GmbH & Co. KG.

In a corporation, the companies are not personally liable, but the company with your assets. Why should you decide to set up a GmbH & Co. KG?

When the GmbH is founded, the shareholders have to make a certain share of the business. These shares must total at least € 12,500.00 at the time of foundation. However, if you are willing to appoint dedicated professionals as shareholders who cannot show enough assets in case of doubt, the establishment of a GmbH & Co. KG can make sense. The required specialists are appointed as limited partners and only have to make a share that is adapted to their financial possibilities.

In addition to tax motives, other motives, such as succession regulations, are often the reason for choosing a GmbH & Co. KG. In the event of the death of the general partner of a limited partnership, the limited partners may establish a GmbH, which then acts as an unlimited partner. Thus, the company can continue to exist, including the company name. [] 67

The management can be carried out by the shareholders without them having to assume the position of general partner. However, management can also be taken over by employees or third parties.

You also achieve a relief in the context of raising capital if you choose GmbH & Co. KG. If, for example, only the limited partners are willing to make new contributions, which increase to their share of the limited partnership, this is possible without this capital being tied to the general shareholder GmbH. When raising capital under partnership law, there is generally greater freedom of design within the framework of the articles of association than for corporations. In particular, the raising of capital in the domestic law of a GmbH is subject to statutory strictness, which significantly restricts the possibility of shaping the company contract. If only the capital strengthening of the company is planned, for example by adding new shareholders, and if the rights to influence and co-determination are to be kept as low as possible, this can be made legally much easier by adding new limited partners to a limited partnership. In the case of the GmbH, domestic law stipulates that all shareholders have a right to information and information, cf. § 51a GmbHG. This means that all shareholders of the GmbH have the right to view the books or to request information about company matters. They can also participate in the appointment of Managing Directors and their removal, cf. § 38 GmbHG. You are a member of the shareholders’ meeting who have rights of instruction vis-à-vis the management, cf. § 37 para. 1 GmbHG. However, if new shareholders are used as limited partners of the limited partnership for the purpose of raising capital, they have significantly lower rights than GmbH shareholders. Within the scope of their rights as a limited partner, they are only responsible for consent rights in the event of extraordinary management processes. An objection in such transactions is in accordance with § 116 Abs. 2 HGB only effective by resolution of the shareholders. Areas of activity of the management that serve the everyday business are therefore to be carried out independently of the consent of the limited partners. A comparable right over far-reaching information and information, such as the right of a GmbH shareholder according to § 51a GmbHG, limited partners do not have. However, according to § 166 HGB, they can request communications in writing about the annual accounts.

In principle, the raising of capital, due to the resulting significantly weaker legal position of the limited partners compared to the new addition of a GmbH shareholder, can be a clear motive to found a GmbH & Co. KG. Possible investors can, on the one hand, receive shares and act as shareholders, but on the other hand their rights can be significantly restricted. The risk that sensitive issues of the company could be exposed due to new shareholders providing capital is therefore not to be feared. [] 68]

A conversion of companies is basically regulated in the conversion law. However, the statutory provisions of the Conversion Tax Act must also be observed. The conversion tax law applies to conversion operations from 12.12.2006.[69] The conversion tax law was last amended due to the withdrawal of the UK from the European Union on 25.03.2019 by Article 3 of the law. 70

The legal form of a company can in principle be determined by the shareholders themselves. The prevailing legal system serves to safeguard the private autonomy of the shareholders, which also makes it possible to change two legal forms. However, the prerequisite is that this change of legal form will provide sufficient protection for the persons concerned in the company. In addition to the shareholders, this also includes the company’s creditors. [71]

The conversion law created on 01.01.1995 is intended to legally justify these processes and thus protect those affected. If an undertaking is to be converted, this conversion shall be carried out in accordance with the statutory provisions applicable to domestic entities subject to convertible structural changes.

The right of conversion is thus reflected in the conversion law. However, individual provisions on conversions can also be found in other special laws for certain types of companies, see, for example, § 179a AktG.

What does the term “conversion” mean? An exact definition is not included in the conversion law. It is an operation whereby a transformation of the legal form is effected by means of reorganisations in the form of capital increases resulting from contributions in kind, contributions, additions or real divisions. [72] In principle, conversions are effected by individual or universal succession. In this sense, universal succession may also be partial in nature. 73

Individual succession is also called singular succession. The concept of singular succession describes the transition of individual rights and duties between two persons through the entry of a new person into society. These transfers can take place in the form of assignments of claims pursuant to § 398 BGB or by assumption of debts pursuant to § 414 BGB. However, debts can only be made under the approval of the creditors in accordance with § 415 BGB. Land transfers or transfers of movable property can be forms of transfer, according to §§ 873, 929 BGB. In order not to confuse the individual succession with a natural acquisition, an example follows. On the basis of this example, it can be seen when it is not an individual legal succession:

Example – Individual rights succession:

Willy (W.) acquires a new computer for his study from Müller GmbH. By concluding the purchase contract according to § 433 BGB, W. receives the ownership of the computer. This also results in a transfer of ownership pursuant to § 929 BGB.

Difference to individual legal succession: W. does not enter into the legal obligations of Müller GmbH. If Müller GmbH has financed this computer via a loan, W. is not the debtor of the loan despite the sale of the computer. The debtor remains Müller GmbH.

In addition to individual succession, there is universal succession, also called universal succession. Universal succession describes the transfer of all rights and duties of one person to another person.[74] Another person thus enters into all legal obligations of the predecessor.[75] This process arises, for example, through a merger of two companies or through an inheritance. The acquisition of the property takes place here as a whole within a legal act.[76] The advantage made possible by the conversion law using universal succession is that capital transfers can take place through these conversions. In addition, the legal entities of this transfer expire if a merger or a division takes place without prior liquidation, cf. §§ 20 para. 1 No 2, 36, par. 1 sentence 2, 131 para. 1 No. 2 UmwG.[77]

Example – Universal Succession:

Müller GmbH merges with Schmitz GmbH. All assets and liabilities of Müller GmbH go through this

transfer to Schmitz GmbH. Schmitz GmbH thus enters into all rights and obligations of Müller GmbH within a legal act. She is entitled to the demands, but also has to pay off the debt.

As mentioned at the beginning, however, partial universal succession is also possible. In the case of partial universal succession, also called special succession, the acquirer enters only into all rights and obligations of a part of the property. The non-transferring part of the assets shall remain with the transferring entity. Instead of the transferring legal entity, however, an additional third acceptor can also occur. [] 78]

Example – Special Rights Succession:

Müller GmbH has divided its company into two subsidiaries. A car workshop and a car rental company. The car workshop is to be transferred to Schmitz GmbH in the course of the partial universal succession. As a result of the spin-off of this division, the entire assets of the Autowerkstatt will be transferred to Schmitz GmbH. It interferes with all rights and obligations within a legal act. However, Schmitz GmbH has no influence on car rental, as this sub-operation is not part of the assets of the spin-off.

Restructurings of domestic entities are subject to § 1 para. 1 UmwG. The conversion of these legal entities is to be carried out according to the conversion law in the following four variants: The merger according to § 1 para. 1 No. 1 UmwG i. V. m. §§ 2-122m UmwG, the division according to § 1 para. 1 No. 2 UmwG i. V. m. §§ 123173 UmwG, the transfer of assets pursuant to § 1 para. 1 No. 3 UmwG i. V. m. §§ 174189 UmwG and the change of form pursuant to § 1 para. 1 No. 4 UmwG i. V. m. §§ 190-304 UmwG.[79]

The types of conversion enumerated in the conversion law are final. There is thus a so-called “analogy ban”. Conversions may not be carried out by analogous application of the statutory provisions which are not subject matter of the Conversion Act. [] 80]

Not included in the conversion law are restructuring measures such as the so-called “share” or “asset deals”. This includes acquisitions of shareholdings by the takeover company and acquisitions of corporate assets. [] 81]

In the conversion law are in § 1 para. 1 HS UmwG named the convertible legal entities. For a conversion in the sense of the conversion law, the verification of whether a convertible legal entity exists is therefore a prerequisite. Individuals or associations under private law may also be competent legal entities. Associations governed by private law, such as cooperatives, natural persons or public bodies, cf. § 3 UmwG, § 124 UmwG. Depending on the type of conversion, the legislator determines which legal entities established in Germany may be involved in a conversion. This is specified separately in sections 3, 124, 175 191 of the Conversion Act. The conversion type thus determines which legal entity is suitable for the planned conversion form. [] 82

The legislator guides the conversion process step by step. The notion of the mode of conversion, as well as the procedure and the existing protection by the conversion are clearly recognizable from the law.

The conversion law also forms the civil basis for the conversion tax law and the restructurings therein.

Figure 3: The conversion law at a glance

Source: own presentation

The conversion tax law also came into force on 01.01.1995. Together with the conversion law, it serves to simplify conversion processes and eliminate tax obstacles in the context of company restructuring.[83], [84]

While the conversion law has made it its task to facilitate the simplification on the basis of civil law of company restructurings, the conversion tax law reduces the tax burden of a conversion operation. The possibility of a tax-neutral transfer of assets is given under certain conditions under the Conversion Tax Act. Because of this tax neutrality option, companies are willing to make conversions at all. If this possibility were not given, hidden reserves would be discovered and taxed in any conversions. Companies would not consider conversion under this condition. [85] A fundamental revision of the Conversion Tax Act entered into force on 13 December 2006. Since then, cross-border conversions are also possible without tax difficulties.

The provisions of the conversion tax law are linked to the provisions of the conversion law. Through this linkage, conversions cannot be made separately from one of the two laws. Consider, for example, § 1 Abs. 1 UmwStG, it is found that parts of the UmwStG (§§ 3-19) apply only to conversions in the V. m. of the Conversion Act. Exclusively for cross-border restructurings, in addition to the conversion law, comparable statutory regulations are also used.

The conversion process requires a precise approach. Only in compliance with the requirements can the conversion of a company be carried out effectively.

Before the transformation of the GmbH into a GmbH & Co. KG can finally be carried out, some work processes must be adhered to. A conversion decision must be formulated, a conversion report drawn up and the registration in the commercial register must be registered.

5.1.1 Conversion decision

Before a conversion can be carried out, a conversion decision must be made. The resolution shall be drawn up by the members or shareholders of the participating entities. [86] The conversion decision also requires the notarial deed according to § 193 para. 3 UmwG. According to § 194 Abs. 1 UmwG, this decision must also contain various minimum components. Firstly, the legal form which the conversion is intended to achieve must be included. The name or company of the new entity must also be mentioned. In addition, the shareholdings in the new company will be named, as well as the nominal amount and the scope or type of new company rights will be discussed. This item shall also include any special rights and severance payments offered by former shareholders. Consequences and countermeasures for the employees of the transferring or changing company must also form part of the conversion decision. The new company contract or a revised statute must be added to the resolution, cf. §218 para. 1 UmwG, § 234 No. 3 UmwG.

5.1.2 Conversion report

According to § 192 UmwG, the representative body of the transferring or changing company has the obligation to prepare a conversion report. [87] The obligation to draw up the conversion report can only be circumvented if all shareholders or Shareholders unanimously waive this. However, this waiver must also be made in notarial and notarized form, according to § 192 para. 2 UmwG.

5.1.3 Entry in the Commercial Register

The conversion is in accordance with § 198 para. 1 UmwG in V. m. § 222 UmwG to be registered with the competent commercial register.

Only after registration in the commercial register will the conversion take effect on a civil law basis.

In order to convert a GmbH into a GmbH & Co. KG, only the change of form pursuant to §§ 190ff UmwG or the merger pursuant to § 2 i. V. m. § 3 UmwG come into consideration. [] 88

5.2.1 Change of form of the GmbH into a GmbH & Co. KG

According to § 191 para. 1 UmwG a change of legal form from a GmbH to a GmbH & Co. KG can be carried out, since the GmbH as a corporation is a legal entity changing legal form in accordance with § 191 para. 1 No. 2 in V. m. § 3 Abs. 1 No. 2 UmwG. In addition, the requirements of the GmbH & Co. KG according to § 191 Abs. 2 No. 2 UmwG also fulfilled. Accordingly, the company of the new legal form must be included in the listing according to § 191 Abs. 2 UmwG. This also includes partnerships. Thus, the GmbH & Co. KG can be legal entity under the new legal form. If the GmbH is also located in Germany pursuant to § 1 UmwG, the change of form of the GmbH into a GmbH & Co. KG is therefore possible.

Until 1969, a conversion from a GmbH to a GmbH & Co. KG was still forbidden. Only since 2012 and the version of the conversion law in force since then can a GmbH be converted into a GmbH & Co. KG. [] 89

In the conversion law, the change of form is regulated in the fifth book of the conversion law, since in §§ 190-304 UmwG. The special feature of the change of form is that the persons involved generally remain identical.[90] It merely changes the legal dress of society.[91] For this reason, a change of legal form involves only one legal entity, unlike the merger.[92] Since the change of legal form is therefore an internal act of the company, this type of conversion does not require a separate contract for conversion.[93] Anyone who wishes to preserve the identity of the participating shareholders and the assets of the company under civil law should opt for a change of legal form in the conversion. [] 94]

Transforming a GmbH into a GmbH & Co. KG is the most common method in today's practice, since the overall legal succession is secured.

5.2.2 Merger of a GmbH into a GmbH & Co. KG

The merger is regulated in paragraphs §§2-122m UmwG in the second book of the conversion law. The merger involves a transfer of assets from the transferring entity to the receiving entity. This takes place in the expiry of a universal succession. The assuming legal entity has either already existed at this time, in accordance with § 2 in accordance with §§ 4 – 35 UmwG, or was newly founded, in accordance with § 2 in accordance with §§ 36-38 UmwG. A merger can thus take place by incorporation into an already existing legal entity or by re-establishment into a newly established legal entity. The assets of the transferring entity shall be transferred to the transferring entity with dissolution. In return, the members of the transferring entity shall be granted new shares in the takeover company. The dissolution of the transferring legal entity takes place without its liquidation.[95] Supplementary to the merger to an existing legal entity are described in paragraphs 39 et seq. UmwG contain special provisions applicable to the parties to the merger. The essential features of a merger as defined in the Conversion Act therefore lie in the total transfer of a company's assets to an existing legal entity or to a newly founded company or company. Legal entity.[96] The merger takes place in the sense of universal succession. Shareholders lose their shares in the transferring entity through the exchange of shares, but receive new shares from the acquiring entity in the course of the merger. The transferring entity goes under without settlement.

When a subsidiary is merged into a parent company, the parent company is

merger “upwards”. A downward merger is referred to as the merger of a parent company into a subsidiary. [] 97

A merger from a partnership to a partnership can take place. The legal reference is in the conversion law under § 3 UmwG. The following merger operations and their handling can be found in the Conversion Tax Act: Mergers between two limited liability companies acc. § 11 UmwStG, from a partnership to a corporation acc. § 20 UmwStG and from one partnership to another partnership acc. § 24 UmwStG.

The merger shall be carried out by means of a merger contract. This must be signed by the participating representatives of the legal entities and notarized. The transferring entity shall first prepare a final audited balance sheet. The final balance sheet serves as a planning basis and must also be enclosed with the subsequent commercial register application.

How the merger actually has to be carried out is set out in paragraphs §§ 4 – 122m UmwG. In fact, a merger is divided into several phases. In addition to the merger agreement, merger reports and audits must also be prepared. Decisions must also be taken.

In addition to the merger agreement as the main component of a merger, the approval of the merger by a general meeting is mandatory. The merger must also be registered and registered in the commercial register. [] 98]

Statutory provisions of the merger agreement on the content are to be found in paragraph § 5 UmwG. Accordingly, the following contents must be included in the merger agreement: The name of the participating legal entities or the company including the registered office of the company acc. § 5 Abs. 1 No. 1 UmwG, the delegation agreement on the transfer of the assets of the transferring entity as a whole to the receiving entity and on the consideration in the form of shares or shares in a company. Memberships of the takeover legal entity according to § 5 Abs. 1 No. 2 UmwG, as well as the exchange ratio of these shares according to § 5 para. 1 No. 3 UmwG.

The final balance sheet may be in accordance with § 17 para. 2 sentence 4 UmwG in the case of the commercial register application about the merger are a maximum of eight months in the past. [] 99

According to § 8 para. 3 UmwG, a merger report must also be prepared if the entire shares of the transferring legal entity are not transferred to the acquiring legal entity. A merger report must also be prepared if the shareholders do not expressly waive it. After submission of the merger agreement and any merger report to the shareholders, a merger decision is necessary. In this, the shareholders must approve the merger agreement and report. The decision is also subject to the statutory regulation of a notarial deed.[100] The effectiveness of the merger is in accordance with § 20 para. 1 UmwG is then given as soon as the entry into the register is made, which is responsible for the seat of the takeover rightholder.

Cross-border mergers are also possible since October 26, 2005. In particular, small to medium-sized enterprises under the domestic legal forms of AG, GmbH or KGaA are to be made possible for cross-border conversions.[101], [102]

A GmbH can be transferred to an existing GmbH & Co. KG by way of merger. This merger is described in paragraphs § 3 ff. UmwStG regulated. If a corporation is transferred to a partnership in the context of a merger, the assets are transferred from the merging GmbH to the acquiring GmbH & Co. KG. The GmbH has according to § 3 Abs. 1 sentence 1 UmwStG to draw up a final balance sheet. The final balance sheet shall be drawn up on the fiscal carry-over date. There is the right to vote, the tax balance in accordance with § 4 para. 1 V. m. § 5 Abs. 1 EStG instead of the final balance sheet as the basis of the merger. However, on the final balance sheet here must be indicated that the tax balance is in accordance with § 4 para. 1 V. m. § 5 Abs. 1 EStG is to serve as a final balance sheet, cf. Tz.3.01 UmwStE. If the right to vote is exercised and the tax balance thus serves as a final balance, this operation is irrevocable. The declaration also serves the interpretation of the book value continuation application, cf. Tz. 03.29 UmwStE. If such a waiver is omitted at the time of filing the tax balance, the common values are to be used. This is usually also done by the financial administration of official channels.[103] However, the right to choose may be exercised retroactively until the validity of the adjustment notice of the assessment period for which the tax transfer date applies. [104]

Figure 4: Merger of a limited liability company into a partnership

Source: own presentation

The conversion law contains a plurality of conversion possibilities. Despite the many different types of conversion, the individual phases of the conversion usually remain uniform, so that a basic scheme can be recognized.

The conversion process basically consists of three phases. The preparatory or planning phase, the decision-making phase and the implementation phase.[105]

5.3.1 The preparation or planning phase

In the preparatory phase, the shareholders involved in the conversion draw up corresponding resolutions. Those decisions should adopt fundamental legal acts. At this stage, the corresponding conversion contracts should be concluded and notarized. These contracts shall be concluded by the competent representative bodies of the companies involved.

According to § 4 ff. i. V. m. § 126 UmwG, however, only the conversion forms of division and merger are to be concluded in this phase. In the case of the conversion possibility of the change of legal form, only the corresponding draft of the resolution for conversion must be made in the preparation and planning phase, see § 194 UmwG.

In addition to the contract conclusions or drafts to be drawn up, there are also obligations to report to the shareholders or members. shareholders and the possible works councils, so that at this stage also representatives of the employees of the company and all shareholders or shareholders are informed about the conversion process. In this process of reporting, works councils and shareholders shall be provided with written reports on the merger or division. explain the conversion report of the change of form. However, once all shareholders waive the reporting obligation and this is done in a notarial form, the creation of reports is not necessary.

Without waiver, the merger or division contracts or the draft change of legal form shall be made available to the works council of the companies at least one month before the upcoming shareholders’ meeting. As a result, the works council can adapt to the possible consequences for employees. In addition to the consequences, the relevant measures should also be identified in the reports, cf. § 5 para. 3 V. m. § 126 Abs. 3 in V. m. § 194 Abs. 2 UmwG.

In addition, an audit report of an independent expert, usually an auditor, must be prepared during the preparation or planning phase. The purpose of this audit report is to cross-examine the contracts or the proposed conversion. If such a cross-check is required by law, only audit firms or independent auditors can be used for such an audit.

A waiver from the cross-examination by independent third parties is only possible by notarized waivers of the shareholders, cf. § 9 para 3 in V. m. § 125 UmwG.

5.3.2 The decision phase

In the decision-making phase, all necessary shareholders of the participating entities are convened to complete and carry out the preparation of the conversion.

In order for the planned transformation to actually take place in the decision-making phase, the necessary meetings must be convened. During these meetings, the shareholders of the participating entities must vote and obtain a majority in order for the conversion to take place. As a rule, three-quarters of the shareholder votes are required to achieve the required majority.

If the conversion decision takes place, it must also be notarized.

5.3.3 The implementation phase

During the implementation phase, the commercial register registration application shall be made. This is carried out by the participating representative bodies of the legal entities. The conversion process shall not be completed until the registration has been completed. Only with completed entry into the commercial register is the conversion process legally effective.[106]

The conversion of a GmbH to a GmbH & Co. KG also has tax implications with regard to the real estate transfer tax and the sales tax.

5.4.1 Property transfer tax

If the right to a property is transferred from the GmbH to the GmbH & Co. KG, this operation is basically an acquisition in accordance with the real estate acquisition tax, pursuant to § 1 Abs. 1 No. 1 GrEStG. Since the conversion transfers ownership to the GmbH & Co. KG, § 1 para. 1 No. 3 GrEStG. In the case of conversion, there is no need for a purchase contract for the property and also no disposition in accordance with § 925 BGB.

By a merger from the GmbH to the GmbH & Co. KG, the GmbH transfers ownership of a property to the GmbH & Co. KG by universal succession. In the sense of the Property Acquisition Tax Act, there is thus a taxable acquisition, cf. § 1 para. 1 no. 3 GrEStG, insofar as the property is located inland. At the time of registration of the merger, the real estate transfer tax arises.

However, there is the possibility of a pro rata tax exemption, in accordance with § 5 V. m. § 6 GrEStG. Due to the conversion of the GmbH into GmbH & Co. KG i. R. of a merger, the property is transferred from the GmbH as sole owner to the GmbH & Co. KG as a total hand. If the GmbH has already participated in the assets of the GmbH & Co. KG, the real estate transfer tax is not levied in relation to the share, cf. § 5 para. 2 GrEStG.

The following illustration is intended to illustrate the process when the property of the GmbH, in this case Müller GmbH, as a corporation and thus as sole owner, transfers the property, in this case the factory site, into the general hand community, in this case Schmitz KG. In this case, Müller GmbH holds a 100% stake in Schmitz KG.

Figure 5: Shared real estate transfer tax exemption in accordance with § 5 para. 2 GrEStG

Source: Based on Prangenberg, A, Aldenhoff, M., Steuerliche Grundlagen der Conversion, 2005, page 53

However, § 1 Abs. 2a GrEStG. If a property has been transferred to GmbH & Co. KG and thus to the partnership, 90 % of the shareholder’s assets must be retained for at least 10 years. If the shareholders change by at least 10% within these 10 years, this operation is considered as transfer to a partnership.[107]

5.4.2 Sales tax

VAT effects of a merger between a limited company and a partnership are not separately stated in the Conversion Tax Act, but such a merger can also have VAT consequences. The legal basis of the VAT Act is to be used here. However, explicit conversion cases are not included in the Sales Tax Act. Thus, the broad guidelines of the VAT Act must be examined. [108]

In the case of a conversion, the first question to be asked is whether this incident generally falls under the taxation of sales tax. Is the merger of a GmbH into a GmbH & Co. KG a taxable turnover within the meaning of § 1 UStG?[109]

Conversions within the meaning of the merger operation are subject to VAT law as

“Business disposals in whole” according to § 1 para. 1a UStG. Accordingly, these cases are subordinated to non-taxable transactions. A business sale in its entirety exists if a company is transferred to another entrepreneur in its entirety against remuneration or free of charge, cf. § 1 para. 1a UStG.

Even in the event of a change of legal form between a GmbH and a GmbH & Co. KG, the conversion does not trigger any VAT consequences, since a change of legal form does not lead to a change of legal entity.

The following section describes in more detail the tax implications of a conversion. In addition to the basic principles, the tax effects of the merger are considered as a transferring company at the GmbH and as an acquiring company at the GmbH & Co. KG.

According to § 9 sentence 1 in V. m. § 4 para. 1 sentence 1 UmwStG, the GmbH & Co. KG as acquiring legal entity must take over the values from the final tax balance sheet from the GmbH.[110] In addition, the GmbH & Co. KG must draw up an opening balance sheet. As a rule, a transfer to book values takes place in order to achieve tax neutrality. [111]

6.1.1 Tax Effects of the Merger

The tax effects are to be differentiated by the transferring GmbH on the one hand and the acquiring GmbH & Co. KG and the participating shareholders on the other hand.

6.1.1.1 Tax effects of the merger on the GmbH

All assets of the GmbH are in principle to be valued with the common value. The GmbH has to draw up a final tax balance sheet. In it, all assets must in principle be identified with the common value, according to § 3 para. 1 sentence 1 UmwStG. By applying the common value, all hidden reserves of the GmbH’s operating assets are realised without gaps. In addition to the assets acquired for remuneration, intangible assets acquired and self-created are also included here, such as the independent company value of the GmbH, cf. Tz. 3.04 UmwStE.

For tax reasons, there is an exception in the framework of pension provisions, according to § 3 para. 1 sentence 2 UmwStG. Usually, pension provisions contain hidden charges, which would lead to a tax expense. For this reason, pension provisions with the value according to § 6a Abs. 3 EStG. [113]

The common value describes the price which would have been calculated in the ordinary course of trade according to the nature of the property for the respective economic good, according to § 9 para. 2 BewG. Personal or unusual circumstances are not included.[114] The common value is to be understood by the legislator as including a profit surcharge rate.[115] The assets of the fixed assets that serve the operation for a specific purpose tend to be valued lower than the balance sheet sub-value in the recognition of the common value. On the contrary, in the case of working capital goods, the common value tends to lead to a higher value because of a calculable profit surcharge. As a rule, the transition due to the merger is a transfer of material groups. According to the Treasury, the valuation must be carried out on all assets. This includes all assets and liabilities. An evaluation on the individual assets is not carried out, however, cf. Tz. 03.07 UmwStE. The common value is derived either by reference amounts in relation to the GmbH, otherwise according to the principles of the income value procedure, according to § 11 para. 2 BewG or §§ 199 - 203 BewG. Analogous to § 6 Abs. 1 No. 7 EStG then a distribution of the common value of the transferring material population to the partial values of the individual assets takes place, see Tz. 03.09 UmwStE. If the operating assets of the GmbH to be transferred contain silent burdens, there may be a negative company value. If this leads to a negative transfer loss, it shall be recognised as a passive offset. [116] However, the overriding view is that the passive compensatory item must be formed only to the extent that the hidden burdens exceed the positive value of the company. Accordingly, the hidden charges are offset against the positive goodwill.[117] If the conversion to the common value takes place, according to the financial administration opinion, in addition to the recognition of the self-created goodwill, the recognition prohibitions according to § 5 EStG are also lifted. This includes, among other things, the provision for imminent losses, see Tz. 03.06 UmwStE. On the contrary, however, this is seen in the practical implementation. [118]

In addition to the transition to the common value, the assets of the GmbH to be transferred can also be recognised uniformly at book value or at an intermediate value. The intermediate value is here a value which lies between the book value and the common value. However, the recognition to the book or intermediate value is in accordance with § 3 Abs. 2 sentence 1 UmwStG to be requested separately. This right of choice exists insofar as the assets at the acquiring GmbH & Co. KG actually become operating assets. It must also be ensured that the subsequent taxation of economic goods is in place. Nor must the law of the State relating to the taxation of profits resulting from the possible sale of these assets be jeopardised. In addition to these aspects, it is also important that either no consideration is granted for the assets to be transferred or, in the case of consideration, this consists only in company rights, according to § 11 para. 2 sentence 1 no. 3 UmwStG.[119]

If a consideration is granted by GmbH & Co. KG that is outside company rights, this leads to a profit realization according to § 3 para. 2 sentence 1 no. 3 UmwStG. According to §§ 20 para 2 sentence 2 no. 4, 24 para. 2 sentence 2 no. 2 UmwStG, although there is a so-called "harmlessness threshold" for transfer operations, this regulation is not provided for in this operation, according to § 3 UmwStG. It should also be noted that the granting of compensatory measures leads to the partial recovery of hidden reserves. Compensation that does not consist in company rights can consist, inter alia, in cash co-payments or by civil granting of shareholder loans, cf. Tz. 03.21 UmwStE. Therefore, the transaction in which GmbH & Co. KG grants loan accounts for the GmbH is also regarded as harmful consideration. The fact that they should be assessed as equity from a tax point of view is irrelevant.

Example:

K and I each hold 50% of the shares in Müller GmbH. A merger of Müller GmbH into Schmitz GmbH & Co. KG is now to be carried out. The operating assets of Müller GmbH have a book value of € 500,000. The common value, meanwhile, is €1,000,000. The operating assets of Schmitz GmbH & Co. KG before the date of the merger have a common value of € 5.000.000. K and I each receive a capital account in Schmitz GmbH & CO. KG with a value of € 250,000 each. I also receive a shareholder loan of € 50,000.

SEGMENT000 solution:

The granted shareholder loan for I from Schmitz GmbH & Co. KG is a consideration that does not constitute consideration by granting company rights. The shareholder loan granted must therefore be regarded as harmful in return. If an application for continued book value has been submitted by Müller GmbH to Schmitz GmbH & Co. KG for the merger, the book value approach is not possible in this respect. The harmful consideration leads to the partial discovery of the hidden reserves at Müller GmbH, which are realized as follows:

The common value of the assets of Müller GmbH is €1,000,000, while the harmful consideration in the form of granting the shareholder loan to I is €50,000. Thus, the harmful consideration is 5 % in relation to the common value. This will reveal 5% of a total of €1,000,000. All assets of Müller GmbH, as well as all unbalanced assets, are to be increased proportionately in the course of realizing the hidden reserves, cf. Tz. 03.23 UmwStE.

Based on the above example, it can be seen that the requirements of § 3 para. 2 UmwStG must be checked personally at the individual shareholders, as the assuming legal entity is a GmbH & Co. KG and thus a partnership. It can also be seen that the book or intermediate values can be used for the most part. The common value shall be proportionate. [122]

The GmbH as a transferring legal entity must submit the application for the continuation of the book value or for the recognition of the intermediate value.[123] This must be requested at the latest by the time when the GmbH submits the final tax balance sheet to its competent tax office, according to § 3 Abs. 2 sentence 2 UmwStG. The GmbH must also file the application in a uniform manner for all assets in the company.[124] If the GmbH has filed the application once, it must not be revoked, cf. Tz 03.29 UmwStE. If the GmbH submits an application to set an intermediate value, the GmbH or its corporate representatives must disclose the extent to which the hidden reserves are to be disclosed, cf. Tz 03.29 UmwStE.

Due to the possibility of the GmbH in the merger to the GmbH & Co. KG the assets to be transferred in the tax final balance sheet with the book or intermediate value or also maximally with the common value, the generally prevailing principle of decisiveness according to § 5 para 1 sentence 1 EStG does not apply here. The commercial valuation approaches and the tax approaches in the tax balance sheet thus fall apart.[125] The commercial balance of the GmbH is therefore not the guideline for the valuations within the tax balance, cf. Tz. 03.10 UmwStE. The GmbH has the possibility, due to possible extra-tax reasons, to prepare the trade balance with the actual fair values. Nevertheless, within the fiscal balance sheet, the continuation to book value approaches can be carried out. Commercial law, the recognition of fair values can lead to the realisation of the hidden reserves and thus to deferred taxes, in accordance with §§ 274, 306 HGB.[127]

In order to achieve a tax-neutral merger of the GmbH to the GmbH & Co. KG, the book value approach must be chosen. The continuation to book values does not reveal any hidden reserves of the GmbH, which would have to be taxed. Nevertheless, in exceptional cases it makes sense to set the intermediate value or even the mean value. An approach to intermediate values or common values makes sense if loss and/or interest carry forwards are still open at the GmbH, according to § 4h EStG.[128] According to § 4 para. 2 UmwStG, both loss and interest carried forward are lost as a result of the merger and transition to book value approaches of the GmbH to GmbH & Co. KG. Any transfer profit arising at the GmbH that would result from recognition at intermediate values or the common value is the last opportunity to use these loss or interest carry forwards. In return, GmbH & Co. KG can create depreciation volumes that lead to a reduction in profits in subsequent years.[129] However, the minimum taxation acc. § 10d para 2 sentence 1 EStG i.v. m § 8 para 1 KStG and according to § 10a sentences 1 and 2 GewStG.

The tax transfer date for the GmbH is the day immediately preceding the merger date according to commercial law regulations, cf. Tz. 02.02 UmwStE. Thus, the day is also considered as the deadline for the preparation of the final balance sheet of the GmbH.

6.1.1.2 Tax effects of the merger on GmbH & Co. KG

GmbH & Co. KG, as assuming legal entity, has to assume the values of the final tax balance sheet of the GmbH without exception, in accordance with § 4 para. 1 sentence 1 UmwStG. If the valuations of the final tax balance sheet change in the course of a still pending audit and the transfer balance is thus influenced, the adjusted valuations are also to be recorded at GmbH & Co. KG, in accordance with § 175 para. 1 No. 2 AO.[130] If the merger of the GmbH to the GmbH & Co. KG into book values has taken place, subsequent value adjustments can be carried out without major problems. However, if the merger was carried out into intermediate or common values, subsequent value adjustments are not without problems. If GmbH & Co. KG has assumed obligations as a result of the merger that were previously subject to recognition restrictions at the GmbH or were even subject to a recognition ban, it is now necessary to question how these balance sheet approaches should be continued. Such obligations can, for example, be provisions for imminent losses, which were shown in the final balance sheet contrary to § 5 EStG. According to § 5 Abs. 7 EStG are provisions for imminent losses and similar obligations in the annual balance sheet of the GmbH & Co. KG following the merger, see Tz. 04.16UmwStE. The passivation restrictions of GmbH & Co. KG are governed by § 5 Abs. 7 EStG preserved.[132]

GmbH & Co. KG enters fully into the tax status of the GmbH, pursuant to § 4 Abs. 2 sentence 1 UmwStG. Loss carry forward and tax losses in accordance with § 4 para. 2 sentence 2 UmwStG and interest carried forwards pursuant to § 4h para a sentence 2 EStG, insofar as they still existed at the GmbH, shall not be transferred to GmbH & Co. KG. The transfer of the GmbH also takes place for tax purposes by way of universal succession. As a result, no transaction of acquisition arises.[133]

Since GmbH & Co. KG enters the tax status of the GmbH, all depreciation methods of the GmbH must also be maintained.[134] Only the initial depreciation value may change in the course of the merger, depending on the value approach chosen. If the GmbH was merged into book value approaches on the GmbH & Co. KG, the basis of the depreciation remains unchanged. However, the basis of assessment for depreciation changes when the merger has taken place into interim or common value assessments, in accordance with § 4 para. 3 1. HS UmwStG. The values which justify the assessment basis for the depreciation increase according to § 7 para 4 sentence 1 and para. 5 EStG in the amount in which they are increased by the hidden reserves, cf. Tz.04.10 UmwStE and § 4 para. 3 2. HS UmwStG. The increase amounts are added to the book values previously applied. The remaining useful life of the individual assets is subject to a new estimate on the tax transfer date, cf. Tz. 04.10 UmwStE.

If GmbH & Co. KG was already involved in the GmbH before the merger, GmbH & Co. KG must recognise this participation at book value. The book value increases by the possible partial write-downs from previous years, which have had a tax impact. Deductions in accordance with § 6b EStG are also added to the book value. At the maximum, however, the shareholding is to be set at the common value, according to § 4 Abs. 1 sentence 2 UmwStG. If a profit results from the increase in the value recognition, this is subject to tax liability, in accordance with § 4 Abs. 1 sentence 3 UmwStG i. V. m. § 8b para. 2 sentences 4 and 5 KStG and § 3 No. 40 sentence 1 letter a sentences 2 and 3 EStG. This taxable profit is the current profit of GmbH & Co. KG and is not added to the takeover result, see Tz. 04.08 UmwStE.

In order to obtain a takeover result, tax law requires two steps. In the first step, the open reserves of the GmbH are taxed. This is done in the course of a simulated distribution, according to § 7 UmwStG. The shareholders of the GmbH will receive income from capital assets according to § 20 para. 1 no. 1 EStG. These are within the scope of their participation in the GmbH. This includes the equity of the GmbH minus the values from the tax deposit account according to § 27 KStG. The income from capital assets according to § 20 Abs. 1 no. 1 EStG shall be deemed to have flowed into the taxable transmission dates upon expiry, cf. Tz 07.07 UmwStE. If in the GmbH economic goods within the tax balance sheet with the common value or an intermediate value were used, this automatically leads to an increase of the simulated distribution according to m. § 7 UmwStG, since the profit also affects the open reserves.[136] The capital gains tax deduction according to § 43 Abs. 1 sentence 1 no. 1 EStG becomes effective at the time of entry into the commercial register and thus only with the effectiveness of the conversion of the GmbH to GmbH & Co. KG, cf. Tz. 07.08 UmwStE.

6.1.1.3 Tax effects of the merger on shareholders

For the shareholders, this results in the following tax assessment:

If the GmbH was involved in the GmbH & Co. KG before the merger, the fictitious dividends must be distributed in accordance with § 8b para. 1,4 and para 5 KStG are taxed as income. The shareholders of the GmbH were themselves in the GmbH & CO. KG and if the shares were held by the individual shareholders of the GmbH in the operating assets, the partial income procedure according to § 3 no. 40 EStG applies. The partial income procedure also applies in the event that the participations pursuant to § 5 para. 2 UmwStG were transferred to the operating assets. In all other cases, the withholding tax regulated in § 32d EStG applies to the shareholders, cf. Tz. 07.07 UmwStE. It is possible to apply the capital gains tax withheld. In the case of trade tax, the emoluments from shares in accordance with § 7 in accordance with § 5 para. 2 UmwStG not to be calculated, see §§ 8 no. 5, no. 9 and no. 2a GewStG and paragraph 18.04 UmwStE.

A takeover result must also be determined at shareholder level, which can result in either a takeover profit or a takeover loss. Such a takeover result must be determined per shareholder. However, if the shares in the GmbH were held by the shareholder in tax law private assets and are therefore not subject to the assessment according to § 17 EStG, no takeover profit or takeover loss can be determined.[138] The prerequisite for a participation according to § 17 EStG is then given if the participation has a participation rate below one percent, see §§ 4 para. 4 sentence 3 and sentence 5 para. 2, 3 UmwStG.

A takeover profit or loss can be determined as follows:

Value of assets to be transferred

less Value of the shares in the GmbH transferred

less Conversion costs according to § 4 Abs. 4 UmwStG

= Takeover profit / loss

Insofar as a takeover profit is attributable to the GmbH as shareholder of GmbH & Co. KG, this remains out of consideration, cf. § 8b para. 2 KStG i. V. m. § 4 Abs. 7 sentence 1 UmwStG. Consequently, 95 % of a takeover profit is ultimately to be treated as tax-free, since 5 % is considered to be non-deductible operating expenses, see § 8b para. 3 KStG.[139]

A takeover loss according to § 4 para. 6 sentence 1 UmwStG, insofar as this applies to the GmbH as shareholder of GmbH & Co. KG, cf. § 4 para. 6 sentence 1 UmwStG. However, this is to be assessed differently if a takeover loss is attributable to the shareholders as natural persons. In this case, 60 % of the simulated distribution is to be taken into account for tax purposes in accordance with § 7 UmwStG.[140] If the non-remunerated acquisition of the shares of GmbH & Co. KG in the GmbH in the last five years is retroactive from the tax transfer date, the takeover loss remains completely out of consideration. This is also the case if the requirements according to § 17 Abs. 2 sentence 5 EStG. This will prevent tax abuses.

According to § 4 para 4 sentence 3 of § 5 UmwStG, a deposit fiction results. The shares in the GmbH are thus transferred to the operating assets of GmbH & Co. KG. This contribution is in turn fictitious for all shares which are subject to the requirements of § 17 EStG or were held by the GmbH in other tax-law assets before the merger. [141]

If the merger combines liabilities with receivables, there may be a takeover profit at GmbH & Co. KG according to § 6 UmwStG, cf. Tz.06.01. ff. UmwStE. However, a takeover profit does not already occur if outstanding receivables exist between the GmbH and the GmbH & Co. KG and these were recognised in the same way within the balance sheets. These outstanding claims are deleted under civil law after the merger and thus remain untaxed within the tax takeover profit of GmbH & Co. KG. However, if the receivables are subject to partial value write-offs and lead to various valuations within the balance sheets, this can lead to a subsequent takeover profit, see § 6 para. 1 UmwStG. In this case, GmbH & Co. KG can form a reserve that reduces the tax takeover profit. However, such a reserve shall be dissolved within the following three years.

Example of calculation of the acquisition result:

Transfer value of the assets taken over

minus transition costs or Conversion costs

less Shares in the GmbH in proportion to the shareholding write-up

= takeover result I

Takeover result I

minus the emoluments in accordance with § 7 UmwStG

= takeover result II

6.1.2 Tax Effects of Changing Forms

Civil law does not transfer the property during the change of legal form. In terms of tax law, however, conversion tax law fabricates such a tax as soon as it leads to an exchange of taxation status. Thus, if a GmbH is converted into a GmbH & Co. KG by way of a change of legal form, there is a change from corporation tax under capital company law to personal income tax of the shareholders of GmbH & Co. KG.

6.1.2.1 Tax Effects of Change of Form at the GmbH

The change of legal form from a corporation to a partnership is treated in tax law as a merger of the two companies.

Even in the change of form, the GmbH must draw up a transfer balance and in principle set the assets there at the common value. The recognition of the common values generally leads to a taxable transfer profit acc. § 18 UmwStG at the GmbH, which must also be observed for trade tax purposes. If the transfer profit falls on shares in the GmbH, this profit is in accordance with § 8b Abs. 2 KStG tax-free. A transfer loss can also occur as soon as the book values exceed the common values. However, the corresponding recognition options between book or intermediate value according to § 3 para. 2 sentence 1 UmwG. The recognition requirements for the exercise of that right of choice shall also be equated with the conditions of the merger. There must be no consideration, with the exception of company rights, no restriction within domestic law on the taxation of the transferred assets, the transferred assets must become the operating assets of GmbH & Co. KG and the transferred assets must later be subject to income tax.[142] The transmission balance sheet corresponds to the final balance sheet of the GmbH as a form-changing legal entity.

Practical data shows that the application for recognition to book or intermediate values is regularly submitted, according to § 3 para. 2 sentence 1 UmwG. Also in the case of a change of form, this can take place informally, however, in accordance with the deadline until the submission of the final tax balance of the GmbH to the competent tax office, according to § 3 Abs. 2 sentence 2 UmwStG. The request is irrevocable and unconditional. An implied application is also possible.[143] In the case of carry-over to the intermediate value, it must be determined precisely to what extent this leads to the discovery of the hidden reserves. The identification of hidden reserves can be given in the exact amount or in percentages.[144] The book value or interim value approach is excluded as soon as the application requirements are not met. This can also be considered for each co-entrepreneur of the acquiring GmbH & Co. KG, where these requirements are not met. The book-value approach is prohibited as soon as the common value of the assets of the transferring GmbH is lower than the book-value sum.[145] The book-value approach is also excluded if the acquiring GmbH & Co. KG does not have any tax-related operating assets and thus operates exclusively in asset management, according to § 3 para. 1 sentence 1 no. 1 UmwStG i. V. m. § 8 UmwStG. The common value must also be set as soon as the German tax law is restricted. If, after the change of legal form, the assets of the transferring GmbH fall into the tax exemption on account of a foreign residence of a shareholder and on account of double taxation agreements concluded, the common value shall apply. This obligation also exists insofar as foreign taxes are subject to

Accounting obligation exists.[146], [147]

With regard to the tax deposit account according to § 27 KStG, the change of form to GmbH & Co. KG as partnership means that the nominal capital of the GmbH is fictitiously extinguished, in accordance with § 29 para. 1 KStG. It is also to be added to the tax deposit account, according to § 28 abs. 2 sentence 2 KStG.[148]

Since there is no change of legal entity during the change of legal form, no capital transfers develop. In the absence of capital transfers, a change of legal form does not trigger a gift or real estate acquisition tax.

6.1.2.2 Tax Effects of Changing Form at GmbH & Co. KG

Also in the case of a change of legal form, the acquiring partnership in the form of GmbH & Co. KG has the economic goods to be taken over in accordance with the final tax or tax levy. Transfer balance of the GmbH in its opening balance sheet with the corresponding valuations. In the event of a book value change due to a possible external audit, the values in the opening balance at GmbH & Co. KG must be corrected accordingly, cf. § 175 para. 1 sentence 1 no. 2 AO.

GmbH & Co. KG enters the tax position of the GmbH. Due to the change of form, the GmbH & Co. KG takes over value assessments within the depreciation, depreciation methods or special depreciation, according to § 4 Abs. 2 UmwStG.[150] Excluded from the change of tax status is also the assumption of loss, interest or EBITDA carry forwards, in accordance with § 4h EStG i. 2 sentence 2 UmwStG.

From a tax accounting perspective, the transfer is tax-neutral. This tax neutrality is justified by the same valuations both in the transfer balance of the GmbH and in the opening balance of the GmbH & Co. KG. The acquisition profit is determined off-balance sheet.

If shares are held in formwechselnden GmbH, these are considered as contributions to the operating assets of GmbH & Co. KG on the tax transfer date. Shares in the GmbH held in private assets are subject to the acquisition costs according to § 5 para. 2 Environmental Protection Act. Shares held in operating assets are to be valued at the book value, in accordance with § 5 Abs. 3 UmwStG. These approaches make it possible to determine the takeover result. The takeover result is the difference between the accepted value of the shares and the notional deposit value. If the transition costs for the transfer of assets are deducted from the difference, the takeover profit or loss is calculated in accordance with § 4 para. 4 sentence 1 UmwStG. According to § 7 UmwStG, a takeover profit is reduced by the fictitious taxable profit distributions of the shareholder. Accordingly, a possible takeover loss increases, in accordance with § 4 Abs. 5 sentence 2 UmwStG.[151]

If a takeover profit is created at the GmbH, this is subject to tax exemption

§ 8b KStG.[152] A takeover loss remains out of recognition, provided that the acquisition of the shares in the transferring GmbH was made within the last five years, measured on the tax transfer date, in accordance with § 4 para. 6 sentence 5 UmwStG.

The business income of GmbH & Co. KG is not reduced by loss carry forwards or trade tax deficiencies of the GmbH, pursuant to § 18 para. 1 sentence 2 UmwStG. The takeover result at GmbH & Co. KG does not fall under the trade tax taxation, pursuant to § 18 Abs. 2 UmwStG.[153]

A sale or relinquishment profit is again subject to business tax, insofar as this is due to a sale or relinquishment. cessation of operation or partial operation of the acquiring GmbH & Co. KG is achieved and this cessation or sale takes place within five years after the change of form. This is always the case as soon as a shareholder of the acquiring GmbH & Co. KG sells or abandons his share in GmbH & Co. KG.[154] This taxation serves to prevent trade tax abuse, pursuant to § 18 para. 3 UmwStG.

6.1.2.3 Tax Effects of Change of Form for Shareholders

Gem. § 5 para 2 i. V. m. § 5 para. 3 UmwStG, the shares in formwechselnden GmbH on the transfer date shall be deemed to be a contribution at book value or at acquisition costs to the operating assets of the acquiring GmbH & Co. KG. However, this fiction does not apply as soon as a private shareholder's shareholding is less than 1 %. In this case, a takeover result cannot be determined, according to § 4 Abs. 4 sentence 3 UmwStG.[155]

If before the change of legal form the participation in the GmbH has been depreciated effective for tax purposes, the shareholder must make a profit correction. This is to be done by attribution to the tax transfer date, according to § 5 Abs. 3 sentence 2 UmwStG.[156]

If within the tax balance still open reserves at the GmbH, these are to be subjected by the shareholder as a simulated full distribution in principle to capital gains tax, according to § 43 para. 1 No. 1 EStG in V. m. § 7 UmwStG. These revenues from capital assets are usually made via the GmbH & Co. KG as a partnership by way of a declaration of assurance pursuant to § 181 AO. The partnership must make the tax deduction and then include the income as commercial income.[157]

6.1.3 Conversion case by Formwechsel GmbH into a GmbH & CO. KG

Domestic Müller GmbH is to be converted into Müller GmbH & Co. KG on 01.01.2022. All necessary conversion formalities shall be deemed to have been completed.

In Müller GmbH, K and I each hold a 50% stake. K and I founded Müller GmbH together. The tax deposit account according to § 27 KStG is € 35,000.00. In addition to co-entrepreneur shares, the shareholder I also receives a loan of € 50,000.00.

Final balance sheet of Müller GmbH as at 31.12.2021 (in brackets = common value):

exemplary balance sheet

Previous opening balance of Müller GmbH & Co. KG:

SEGMENT013 Solution:

The principle of tax neutrality cannot be fulfilled in this change of form, as I not only receives co-contractor shares in Schmitz GmbH & Co. KG. An additional loan will be granted. The loan thus constitutes a harmful consideration, in accordance with § 11 Abs. 2 sentence 1 no. 3 UmwStG. The share of the hidden reserves is disclosed on a company-by-company basis i.e. the consideration of € 50,000.00. For this purpose, the detection rate must first be determined. This subsequently determines the transmission result. The hidden reserves of the assets to be transferred are increased on the basis of the detection rate. Note: A partial disclosure of the company’s goodwill does not take place here, since the remaining assets have not yet been completely exposed to the hidden reserves. [158] Only when all hidden reserves in the assets to be accounted for have been exhausted will the goodwill be revealed.

Determination of transfer profit of Müller GmbH:

1st detection rate:

2nd recovery amount

3rd adjustment of final balance sheet Müller GmbH

Impact on the acquiring Müller GmbH & Co. KG:

First, a shareholding correction profit is to be determined. However, this determination is not necessary here, as there is no partial write-down on the existing shares of Müller GmbH. Consequently, the outstanding reserves must now be assessed.

The open reserves are in accordance with § 7 UmwStG i. 1 no. 1 EStG in the amount of the shareholders’ participation rate. Accordingly, Müller GmbH must subject 50 % of the capital gains tax for K and I of € 309,167 = € 154,583.50 at 25 %. Müller GmbH must thus withhold a total of € 77,291,75 in capital gains tax and pay it to the competent tax office.

Consequently, the takeover balance of Müller GmbH & Co. KG can now be compiled as an acquiring legal entity.

In the above-described application, a transfer gain of approximately €4,167 results. This is subject to § 23 Abs. 1 KStG of corporation tax. The corporate tax is thus € 625.05 plus the amount. Solidarity surcharge of 5,5 % € 34,38.

The trade tax for an imputed lifting rate of 400% is € 574, according to § 11 para. 1 sentence 3 1st half sentence i.v. m. § 11 para. 2 V. m. § 16 Abs. 1 % by weight

according to § 7 para. 2 sentence 4 and § 5 para. 1 no. 6 UmwG is commercially possible to obtain retroactive effect within a maximum of eight months. Since the transformation of the GmbH into a GmbH & Co. KG only becomes real when the commercial register is entered, this is an economic or debt-law retroactive effect.

6.2.1.Retroactivity in the case of a merger

In the merger, according to § 2 para. 1 UmwStG i. V. m. § 2 Abs. 3 and 4 of the UmwStG also the possibility of obtaining a tax-law reference to the merger act.[159] This shall also be done over a period of up to eight months. In the case of the tax back relationship, the assets and income of the GmbH and that of GmbH & Co. KG are determined as if the assets of the GmbH had already been transferred to the GmbH & Co. KG at the expiry of the transfer date to be determined under tax law, cf. § 2 para. 1 sentence 2 UmwStG. For example, all transactions that relate to the GmbH from a civil-law point of view, but which are temporarily after the transfer date, are attributed to GmbH & Co. KG under tax law.[160] As a result, these transactions do not trigger any corporate tax consequences, since the merger takes place on the GmbH & Co. KG, i.e. a partnership. Compensation to shareholders, e.g. in the form of shares in the company, is excluded from this retroactive effect fiction.[161] The retroactive effect is also to be treated in the context of trade tax, according to § 2 Abs. 1 sentence 2 UmwStG.

6.2.2 Tax retroactive effect on the change of form

In the event of a change of legal form, both the assets and the income shall be determined as if the assets had been transferred to the acquiring entity at the latest on the expiry of the transfer date and the transfer balance to be established thereon.

To offset the transfer profit with possible losses or remaining loss carry forwards is only permitted if such offsetting would have been feasible outside the tax retroactive effect, according to § 9 para. 3 UmwStG i. V. m. § 2 Abs. 4 sentence 1 UmwStG. Similarly, with not yet balanced negative income, interest carried forward pursuant to § 4h para. 1 sentence 5 EStG or to negotiate with an EBITDA lecture, acc. § 4h para. 1 sentence 3 EStG. A possible use of losses by compensation is also subject to these conditions.

The tax retroactive effect in the event of a change of legal form applies only to income tax. For the purposes of VAT, the legal entity of the change of legal form must itself subject the transactions to VAT which relate to the retroactive period.

6.2.3 Tax retroactive effect in the change of form according to the Corona Tax Assistance Act

Since the corona crisis in 2020, the German Bundestag adopted the Corona Tax Assistance Act on 28 May 2020. [162]

In this law for the support of companies particularly affected by the corona crisis, the German Bundestag has stipulated that, among other things, the period of retroactive tax effects in the event of a change of legal form into a partnership is no longer eight months, but an extension to twelve months applies.[163] The prerequisite is that either the registration for the commercial register registration has been completed by 31.12.2020 or the transfer agreement has been concluded by 31.12.2020, cf. § 27 para. 15 UmwStG.

On 22.10.2020, a regulation was then introduced to extend the measures, e.g. in company law to combat corona effects. Accordingly, in 2021, the basis for a change of legal form can also be a final balance sheet, which was drawn up a maximum of twelve months before the commercial register registration of the conversion, according to § 17 para. 2 sentence 4 UmwG.[164]

6.2.4 Exit of a shareholder

The retroactive effect fiction does not apply if shareholders of the transferring GmbH obtain an exit from the company and this occurs in the retroactive effect period of basically eight months, cf. Tz.02.17 ff., UmwStE 2011. In this case, the status of shareholder of the GmbH in the retroactive period is taxed. If shareholders leave against a severance payment in cash values in accordance with § 29 in accordance with § 207 UmwG, they are also to be treated as shareholders of the GmbH in the retroactive period, cf. Tz. 02.29 UmwStE 2011.[165]

For the capital gain, the outgoing shareholder or Shareholders are tax schemes used to tax the sale of shares in corporations. The share is then taxable according to § 17 EStG with the personal tax rate according to the Income Tax Act and thus corresponds to the income from business operations. If the shareholder does not sell all but only part of his share, the part not sold is still subject to the retroactive effect regulation, cf. Tz. 02.29 UmwStE 2011.

6.2.5 Profit distributions to the shareholders of GmbH & Co KG

In the case of profit distributions at the GmbH, which may still exist under civil law, different perspectives must be considered in the retroactive period. Particular attention should be paid here, among other things, the time when the profit distribution was decided and when it actually flowed. It should also be noted whether there is a subsequent participation in the GmbH & Co. KG of the shareholder or whether there is a withdrawal of the shareholder in the retroactive period. In order to determine this in more detail, the following case studies are to be investigated:

SEGMENT041 Example 1:

The decision to distribute profits is before the tax transfer date. In addition, the distribution of profits actually flowed to the shareholder before the tax transfer date.

Solution to 1:

The profit distribution is assigned to the tax regulations of the GmbH. The profit distribution to the shareholder before the tax transfer date has already reduced the profit of the GmbH in the corresponding marketing year, cf. Tz. 02.25 UmwStE. The participating shareholder must tax the profit distribution within the framework of the income from capital assets according to § 20 EStG, cf. Tz. 02.26 UmwStE.

Example 2:

The decision on the distribution of profits is before the tax transfer date. The actual inflow of the profit distribution to the shareholder is after the tax transfer date.

Solution to 2:

The profit of the GmbH was not reduced in the corresponding marketing year by the profit distribution. However, the decision was already valid. Thus, in the old marketing year at the GmbH a passive balance sheet item is to be formed, which shows the liabilities from profit distributions. This leads to a corresponding reduction in the assets of the GmbH. The inflow of the profit distribution is deemed to have been executed on the tax transfer date, irrespective of its actual inflow to the shareholder. At the latest when the conversion of the GmbH into a GmbH & Co. KG by means of merger or change of form is realized, the profit distribution is deducted from the tax deposit account according to § 27 KStG. For this process, either the GmbH or subsequently the GmbH & Co. KG has a tax certificate according to § 27 Abs. 3 KStG, cf. Tz 02.27 UmwStE.

Example 3:

The decision to distribute profits lies in the period of tax retroactive effect, i.e. after the tax transfer date. The inflow of the profit distribution is thus also after the tax transfer date. The shareholder is a shareholder of the former GmbH and does not leave the company after the transformation of the GmbH into a GmbH & Co. KG.

Solution to 3:

According to § 2 para. 1 V. m. § 2 Abs. 2 UmwStG, the distribution of profits to the shareholder is deemed to have already flowed on the tax transfer date. Since the resolution took place after the tax transfer date, the profit distribution corresponds to a transfer of assets from GmbH & Co. KG. Due to the fiction of the total distribution at the GmbH during the conversion, this leads to control freedom, cf. Tz. 02.28 UmwStE.

SEGMENT003 Example 4:

The resolution and also the inflow of the profit distribution is also in the period of retroactive tax effects and thus after the tax transfer date. However, the shareholder of the former GmbH leaves after the conversion or in the retroactive period.

solution to 4:

The retroactive effect fiction according to § 2 UmwStG does not apply to the shareholder. The profit distribution is attributable to the GmbH. Passive balance sheet items reduce the assets of the GmbH, cf. Tz.02.33 UmwStE. The distribution of profits shall be adjusted off-balance sheet. As a result, the profit distribution does not affect the tax profit of the GmbH, cf. Tz 02.34 UmwStE. The distribution of profits is according to § 20 Abs. 1 sentence 1 no. 1 EStG with the shareholder and is therefore not simulated back to the tax transfer date.

On the basis of these examples, it can be seen that tax-free withdrawals or taxation according to § 20 para. 1 sentence 1 no. 1 EStG. The decisive factor for the tax administration is, on the one hand, the time at which the distribution of profits flows to the shareholder and, on the other hand, whether the shareholder leaves the company.

6.2.6 Other payments to the shareholders of GmbH & Co. KG

Partners of the GmbH can simultaneously work for the company. If this is the case, monthly salary payments are made to the shareholders. At GmbH & Co. KG, these salary payments are made as special allowances according to § 15 Abs. 1 No. 2, sentence 1, sentence 1, 2. HS EStG. Such special allowances lead to the co-contractor being added to the profit share. As with profit distributions, a distinction must also be made here whether the shareholder leaves the company during the tax retroactive period or whether he remains a shareholder of GmbH & Co. KG.

If he remains a co-contractor of GmbH & Co. KG, the salary payments are to be regarded as special operating income and thus lead to an advance profit at GmbH & Co. KG. The fiction of tax retroactive effect applies.

If the shareholder is excluded, the salary payments constitute wage income according to § 19 EStG and are therefore subject to general taxation.[167] On the part of GmbH & Co. KG, these payments represent operating expenses.

If a transfer profit is realized due to the recognition of common values or intermediate values, this is subject to business tax, in accordance with §§ 9 to 9 UmwStG i. 1 UmwStG.[168]

If the transferring legal entity, i.e. the GmbH, still has current or carry-forward shortfalls according to §10a GewStG, these cannot be reduced from the business income of the transferring legal entity, i.e. the GmbH & Co. KG, in accordance with § 18 para. 1 sentence 2 UmwStG. Thus, the trade tax deficiencies remain with the GmbH.[169]

An arising profit or loss from the takeover is not subject to trade tax at GmbH & Co. KG, in accordance with § 18 para. 2 UmwStG.

According to § 18 para. 3 UmwStG is subject to trade tax on the sale of the business or a part of the business or also shares of the company. However, this is only the case if GmbH & Co. KG undertakes such a sale within five years of the conversion. A crediting in accordance with § 35 EStG of the resulting trade tax measurement amount also does not take place, according to § 18 para. 3 sentence 3 UmwStG.

A deduction within operating expenses is also excluded.

If the business or a part of the business of GmbH & Co. KG is sold or abandoned within five years of the conversion, this profit is subject to trade tax, in accordance with § 18 para. 3 UmwStG. This prevents circumvention of business tax. In principle, the GmbH as a transferring corporation is liable for trade tax for the sale of business. However, trade tax exemption is basically a partnership. If the GmbH is converted into a GmbH & Co. KG at an early stage and is a task or a sale of GmbH & Co. KG after the blocking period of five years, this sale may be subject to trade tax exemption.

7.2.1 Sale of assets

If assets are sold by the GmbH before the conversion, the resulting profit is generally trade tax.

Due to the transformation of the GmbH into GmbH & Co. KG, no trade tax is incurred in the sale of individual assets, as far as the sale results from a joint venture and thus falls to a natural person.

7.2.2 Sale of co-contractor shares

Just like the sale or cessation of the operation of GmbH & Co. KG, the profit from the sale or cessation of a share of the co-entrepreneur is also subject to trade tax if the blocking period of five years is undershot, in accordance with § 8 para. 2 sentence 2 UmwStG.[170] If the blocking period is not undershot, the sale of the co-entrepreneur share is also free of trade tax, in accordance with § 7 sentence 2 GewStG.

The "Law for the Modernization of Corporate Tax Law", short "KöMoG", introduced a new option model into the Corporate Tax Act.[171] This model was enshrined in the Tax Act by § 1a KStG. An application for this option may be submitted for the first time from the 2022 assessment period. The new option model now establishes a tax-legal right of choice, through which the taxation of commercial companies, but also partnership companies, can now be taxed according to the taxation guidelines of corporations.

In principle, the taxation of corporations is governed by the Corporate Tax Act and the principle of separation prevails. The opposite is basically the partnerships. Profits are subjected to income tax here, using the principle of transparency. The consequence of this is the "dualism of corporate tax law".[172], [173] The possibility of opting for corporate taxation leads to the procedural and substantive equality of persons trading and partnership companies and corporations.[174] Legally, a fictitious change of form is triggered.

According to the justification of the law, this regulation creates a "true legally neutral taxation". Legally neutral taxation thus automatically reduces the significant differences between the taxation of companies and employees and the resulting discrepancies in the overall tax burden on companies. [176]

It should be mentioned, however, that only person trading company can use the option. Personnel trading companies are companies of the HGB, which must be entered in the commercial register. This includes, for example, the limited partnership or the open commercial company. A company under civil law, i.e. a so-called GbR, does not have the option.

According to § 1a para. 1 sentence 1 KStG, an application requirement is given for the exercise of optimization. In addition, a shareholder resolution must be made in which a change of legal form according to conversion law regulations must be approved.

The application must be submitted electronically at the latest one month before the beginning of the marketing year to the competent tax office for which the optimization is sought, according to § 1a para. 1 KStG in V. m. § 1a para. 1 sentence 3 KStG in V. m. § 180 AO.

The option for taxation under the Corporate Tax Act is excluded if the company is resident abroad after opt-in and is not subject to any domestic or comparable tax liability. Also excluded from the option option are investment funds in accordance with the InVStG.

In addition to the structural taxation of partnerships and corporations, the tariff tax burden is characterised by enormous discrepancies. The principle of transparency prevailing in the partnership leads to taxation according to the rules of the Income Tax Act of the company profits earned by the respective shareholders. In this respect, the partnership is regarded as a taxable entity while the shareholders exercise taxation.[177] The partnership also serves as a tax entity i.s. for determining the type and determination of income.[178], [179]

The shareholders, in turn, serve as a tax-law entity in the sense of income tax.[180] Comparing the shareholders of a partnership with a sole proprietorship, one finds equality in the context of taxation of income.[181], [182] Especially in the context of taxation of the special business assets of the shareholders of the partnership, this equality becomes clear.[183]

This usually results in the following tax burdens: If a shareholder has a top tax rate of 45 % plus a solidarity surcharge of 5.5 %, the total tax burden is 46.71 %. Included in the total tax burden is already the consideration of the crediting of the trade tax measurement amount according to § 35 EStG.[184], [185], [186] The trade tax is applied here with a factor of 4.0.

The principle of separation prevails in corporations.[187] The corporation is thus taxed independently of its shareholders. The capital company and the shareholders are to be regarded as independent tax entities. It is not possible for the company to interfere with its partners.

Through this principle of separation, a corporation usually achieves the following tax burden: At the prevailing corporate tax rate according to § 23 para. 1 KStG of 15 % plus a solidarity surcharge of 5,5 % and a business tax of 14 % gives a total tax burden of 29,83 %.

For both tax calculations, a business tax levy of 400 % was used.

In the case of the partnership, although there is the possibility of the recovery advantage under § 34a EStG, this also does not eliminate the effective higher tax burden of the partnership in contrast to the capital company.[188], [189], [190], [191]

It is therefore obvious that a corporation must bear a much lower tax burden than a partnership in the event of a recovery.

The optimization thus allows particularly profitable partnerships to benefit from the lower corporate tax rate.

Should a GmbH be converted into a GmbH & Co. KG for reasons other than tax reasons, there is now also the possibility to be taxed according to the Corporate Tax Act from the VZ 2022 and thus to achieve a lower overall tax burden.

The optimization for taxation pursuant to § 1a KStG is, according to the legislature, to be equated by means of fiction with an effective change of form under civil law in the conversion law. The legislature is thus based on the provisions of the sixth to eighth part of the Conversion Tax Act for optimization. The same rules apply in the case of a real change of legal form from a partnership to a corporation.

If a GmbH & Co. KG opts for taxation under corporate tax law, there is a new change of legal form.

In principle, a change of legal form from a partnership to a corporation leads to taxation according to § 16 para. 1 sentence 1 no. 2 EStG, since a transaction of sale or acquisition is simulated for tax purposes by the change of entity, in accordance with § 190 para. 1 UmwG.[192], [193]

According to § 1a para. 2 sentence 1 KStG, this simulation also applies to the exercise of the option. The optimization achieves an exchange-like or paid change of legal entities. The shareholders fictitiously transfer their shareholder share to a corporation and receive shares in it. This basically leads to the discovery of the hidden reserves. However, there is also the possibility of carrying forward the book value according to FIG. § 25 UmwStG in V. m. § 20 in V. m. § 21 UmwStG. Against this background, it is also decided whether the option for corporate taxation is subject to tax neutrality or whether the hidden reserves are discovered.[194]

If a partnership, here for GmbH & Co. KG, is to exercise the option for corporate tax, the tax situation of the company must be checked in advance. It must be ensured that the optimization according to § 1a KStG does not violate any blocking period regulation.

8.4.1 Locking periods in the Inheritance Tax Act

Since a GmbH & Co. KG can also be converted for inheritance tax reasons, the blocking periods in the sense of the Inheritance Tax Act must also be checked. However, since the option according to § 1a KStG serves only for purposes of income taxation, the blocking periods according to the Inheritance Tax Act are endangered by the exercise of the option, according to § 1a Abs. 1 sentence 1 KStG.

8.4.2 Locking periods in the Real Estate Transfer Tax Act

In addition to the inheritance tax lock periods, however, the lock periods within the Property Acquisition Tax Act must also be observed. A blocking period of ten years in accordance with § 5 para. 1 GrEStG is only given if a plot of land is transferred to a total hand of several co-owners. Here a real estate transfer tax is not charged if the share of the total hand assets corresponds to the share of the participants in the property during the blocking period of ten years, according to § 5 para. 3 sentence 1 GrEStG. The optimization according to § 1a KStG shall be treated as equivalent to the requirements, in accordance with § 5 para. 3 sentence 2 GrEStG.[195]

In the case of the transfer of property from a collective hand into the ownership of several persons involved in a collective hand and thus into co-ownership, in principle no real estate transfer tax is levied, cf. § 6 para. 1 sentence 1 GrEStG.

However, if a person trading company later decides to opt for taxation under the Corporate Tax Act, this violates the blocking period regulation according to § 5 para. 3 sentence 3 GrEStG.[196]

8.4.3 Locking periods for the transfer of co-entrepreneur shares

If a co-contractor share or a company or Transferring part of the operation free of charge applies in principle i.S. of § 6 Abs. 3 EStG the continuation of the book value. However, the transferor may retain special operating assets. In this case, a blocking period of five years according to § 6 Abs. 3 sentence 2 EStG. Within this blocking period, the acquired co-entrepreneur share or operation or part of the operation is not abandoned or disposed of. Otherwise, the retroactive consideration of the partial value applies, which leads to the realization of profit and thus to the business tax liability.

The change of form, which is fabricated by the optimization, is also a sale or task within the meaning of § 6 para. 3 sentence 2 of the EStG.[197] In this case, it is irrelevant whether the shape change has taken place under book or intermediate values or under common values. [198]

In order to avoid a breach of the lock-up period, the shareholder share must later be transferred to a corporation at book values. In addition, there must be a participation in the corporation for at least five years. During this period, the share of the co-entrepreneur may neither be abandoned nor sold, according to §20 UmwStG i.V. m. § 25 UmwStG i.V. m. §6 Abs. 3 sentence 2 EStG.[199]

Basically, the option according to § 1a para. 2 sentence 1 KStG, however, a change of legal form which is equated with a sale. This change of form thus results in a violation of the blocking period, in accordance with § 6 Abs. 3 sentence 2 EStG.

There are various conversion variants for companies to convert their current legal form. The various possibilities for carrying out conversions are supported by the conversion law on the one hand and the conversion tax law on the other. Not only tax or business reasons are behind the decision to convert a company. Private reasons, such as securing the succession, can also be motives for this. If a limited liability company is converted into a partnership, this may take the form of a change of legal form or merger. In contrast to the merger, only one legal entity is involved in the change of legal form. Since here only a pure transfer of assets takes place and the identity is preserved, this variant is often used in practice. The change of legal form of a corporation into a partnership, in this case from a GmbH to a GmbH & Co. KG, is largely uncomplicated under civil law.

The merger of a GmbH into a GmbH & Co. KG is the second possibility of conversion. This involves the transferring legal entity, the GmbH, and the acquiring legal entity, the GmbH & Co. KG. From a tax point of view, the possibilities for conversion do not differ between change of form and merger. Both conversions are subject to the statutory provisions of the Conversion Tax Act. Even if, under civil law, a mere transfer of assets takes place in the change of legal form, a greater amount of work is to be carried out under tax law, both in the change of legal form and in the merger. The reason for this is the change from a corporation to a partnership. Both companies are generally treated differently for tax purposes. Whether a change of legal form from a corporation to a partnership always makes sense can not be decided on a blanket basis. Companies must analyze a conversion in detail in advance. It is not only the impact on society that needs to be considered, but also the impact on shareholders. Even if a change of legal form or merger has been deemed appropriate in advance, it is necessary to verify that the effects of such a conversion do not overcompensate for the aspects envisaged in advance. Various blocking periods must be observed and in addition to the income tax or accounting consequences, the real estate tax and trade tax consequences must not be ignored. With the introduction of the new option to opt for corporate tax as a person trading company, in accordance with § 1a KStG, the attractiveness of a partnership from a tax point of view has increased in any case, since the overall tax burden is lower. Nevertheless, the question of whether a conversion of a corporation into a partnership makes sense cannot be answered in a blanket optimum manner. This decision must be considered individually for each company.

With regard to the hidden reserves, there is the possibility to realize the conversion tax-neutrally. However, after the elaboration described, I come to the conclusion that it can also make sense to realize hidden reserves in order to achieve higher depreciation rates for the acquiring legal entity. Higher depreciation rates lead to a lower profit, which in turn would lead to lower taxes in subsequent years. Whether here, however, the full hidden reserves should be revealed or there is an optimal intermediate value, cannot be calculated flat-rate. Among other things, this is also dependent on the varying tax rates of the participants or whether a thesaurierungsoption is exercised or the option according to § 1a KStG is used. Also, the possible lower taxes in subsequent years by such a discovery of the hidden reserves must always be considered in relation to the actual taxes arising from the discovery in the conversion process.

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[1]Cf. Statistical Business Register, Federal Statistical Office, December 2021, <https://www.destatis.de/DE/Topics/Industry/Company/Company Register/Tables/Company-

legalform-wz08.html?view=main[Print]>, (2021-12-06) [access 2022-09-16]

[2] Cf. König, R., Maßbaum, A., Suerth, C., Steuer und Rechtsformwahl, 2011, page 5.

[3] See Jula, R., Der GmbH-Gesellschafter, 2004, page 1.

[4] See Egly, H., Klenk, F., Die Gesellschaftsteuer, 1994, NWB Nr. 42, page 343.

[5] See MoMiG, v. 23.10.2008, BGBl 2008 I, Nr. 48, page 2026 f.

[6] Cf. Arens, S., The Liability of the Remaining Shareholders, 2019, NWB No. 27, page 1985.

[7] See Verspay, H., GmbH-Handbuch, 2014, page 6.

[8] See Wachter, T., GmbH-Gesellschafterliste, 2018, GmbHR, issue 21, pages 1129.

[9] See Jula, R., Der GmbH Managing Director, 2019, pages 19-20.

[10] See Jula, R., Der GmbH-Gesellschafter, 2004, page 3.

[11] See Schreiber, U., Kahle, H., Ruf, M., Steuer der Unternehmens, 2021, p. 365.

[12] See Stache, U., Steuer der GmbH, 2019, pages 3f.

[13] See BFH, judgment of 23.06.1992, IX R 182/87, BStBl 1992 II, p. 972.

[14] See Stache, U., Steuer der GmbH, 2019, pages 109 f.

[15] See BFH, judgment of 14.10.1992, I R 17/92, BStBl 1993 II, page 352.

[16] See Stache, U., Steuer der GmbH, 2019, page 111.

[17] See Schreiber, U., Kahle, H., Ruf, M., Steuer der Unternehmen, 2021, p. 366.

[18] See Schreiber, U., Kahle, H., Ruf, M., Steuer der Unternehmens, 2021, p. 367.

[19] See Hager, J., Die Covert Profit Distribution, 1989, ZGR 1/1989, page 72.

[20] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2014, p. 19.

[21] See RG, Decision of 04.07.1922, Rep. II. B 2/22, RGZ, 1922, pages 101 et seq.

[22] See BGH, judgment of 12.07.1956, II ZR 218/54, DB, 1956, p. 242.

See Lange, J., Die GmbH & Co. KG, NWB, No. 24, 1988, page 2937.

[24] See BGH, judgment of 23.08.1977, II ZR 230/75, DB, 1977, page 1249.

[25] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2007, page 20.

[26] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2007, p. 21.

[27] See BGH judgment of 09.03.1981, II ZR 54/80, BGHZ 80, 1981, p. 129.

[28] See OLG Hamm, Resolution of 16.06.1976, 15 W 1975/76, DB, 1976, page 1859.

[29] See Herig, C., Sudhoff, H., GmbH & Co.KG, 2000, § 9 paragraphs. 23.

[30] See Michalsky, L., Heidinger, A., GmbHG-Gesetz, 2010, § 3 paragraph 7.

[31] See BayObLG, Decision of 02.08.1996, 3Z BR 73/96, DB, 1996, page 2025.

[32] See Binz, M., Sorg, M., Die GmbH & Co. KG, 2018, §3 paragraphs 8 et seq.

[33] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2007, page 40.

[34] See Hesselmann, M., Mueller-Thuns, T., Tillmann, B., Handbuch GmbH & Co. KG, 2009, paragraphs 12 et seq.

[35] See RFH, judgment of 13.03.1929, VI A 116/29, RStBl, 1929, p. 329.

[36] See RFH, judgment of 18.02.1933, I A 439/32, RStBl, 1933, p. 375.

[37] See BFH, judgment of 22.08.1951, IV 246/50, BStBl III, 1951, p. 181.

[38] See BFH, judgment of 16.09.1958, I 351/56 U, BStBl III, 1958, p. 462.

[39] See Geuenich, M., Hesselmann, M., Tillmann, B., Mueller-Thuns, T., Handbuch GmbH & Co. KG, 2020, § 4 paragraphs. 130.

[40] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2007, p. 19.

[41] See Sobanski, S., Bäuml, S., § 15 EStG, 2022, § 15 Rz 6.

[42] See BFH, Decision of 25.06.1984, GrS 4/82, BStBl II, 1984, page 751.

[43] See BFH, judgment of 28.10.1999, VIII R 66-70/97, BStBl II, 2000, p. 183.

[44] See BFH judgment of 27.05.1993, IV R 1/92, BStBl II, 1994, p. 700.

[45] See Gehle, B., Kontrollrecht des Kommanditisten, 2013, MDR 23/2013, pages 1416-1417.

[46] See BFH, judgment of 11.10.1988, VIII R 328/83, BStBl II, 1989, p. 762.

[47] See BFH, Decision of 25.06.1984, GrS 4/82, BStBl II, 1984, page 751.

[48] See BFH, judgment of 04.08.1971, I R 209/69, BStBl II, 1972, p. 10.

[49] See BFH judgment of 29.04.1981, IV R 131/78, BStBl II, 1981, p. 663.

[50] See Wagner, H., Rux, H.-J., Die GmbH & Co, KG, 2009, page 299.

[51] See Blümich, W., Brandis, P., Heuermann, B., EStG Kommentar § 15a, 2013, paragraph 73.

[52] See Brähler, G., Conversion Tax Law, 2014, page 3.

[53] See Hallerbach, D., Dönmez, H., Liebert, M., Wepler, A., Wollny, P., Business and practice transfers, 2022, page 1746.

[54] See Prangenberg, A., Stahl, M., Steuerliche Grundlagen der Umwandlung, 2010, p. 13.

[55] See Madl, R., Conversion Tax Law, 2002, page 1.

[56] See Hoffmann, W.D., Bärwaldt, R., Prinz, U., Beck’sches Handbuch, 2014, paragraph 122, page 34.

[57] See Wagner, H., Rux, H. J., Die GmbH & Co. KG, 2009, page 42.

[58] See Volb, H. Foundings of partnerships, 2013, page 61.

[59] Cf. Zweites Corona- Steuerhilfegesetz, BGBl I, Nr. 31, 2020, pages 1512-1516.

[60] See Hesselmann, M., Mueller-Thuns, M., Tillmann, B., Handbuch GmbH & Co. KG, 2009, page 44.

[61] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2014, page 208 f.

[62] See Birk, D., Bärenz, U., Transactions, Vermögens, 2008, page 316.

[63] See BMF, letter of 17.04.2019, IV 6 – S 2296a/17/10004, BStBl I, 2019, page 2296a.

[64] See Steinhoff, S., GmbH or GmbH & Co. KG, 2012, StuW 9/2012, p. 526.

[65] See Preißer, M., von Rönn, M., Die KG und die GmbH & Co. KG, 2018, page 202f.

[66] Cf. Law on the repatriation of the solidarity surcharge 1995 of 10.12.2019, BGBl I, 2019, page 2115.

[67] See Lange, J., Die GmbH & Co. KG, NWB, No. 24, 1988, page 2937.

[68] See Fehrenbacher, O., Tavakoli, A., Steuer der GmbH & Co. KG, 2007, pages 22 f.

[69] See Schmidt, R., Solbach, K., Jesgarzewski, T., Schmittmann, J., Steuerrecht, 2020, page 140.

[70] Brexit Tax Accompanying Act, v. 25.03.2019, BGBl 2019 I, pages 357 f.

[71] See Schumann, H., Moderne des Personengesellschaftsrecht, 2021, StuB, Nr. 16, page 646.

[72] See Arndt, S., Heuel, I., Transformation of undertakings, 2007, page 167.

[73] See Brähler, G., Krenzin, A., Conversion Tax Law, 2020, page 1.

[74] See Heckschen, H., Beck’sches Notar-Handbuch, 2019, § 24, paragraph 93.

[75] See BGH judgment of 02.07.2021, V ZR 201/20, MDR, 2021, p. 1384.

[76] See Brähler, G., Krenzin, A., Conversion Tax Law, 2020, page 2.

[77] See Brähler, G., Krenzin, A., Conversion Tax Law, 2020, page 18.

[78] See Brähler, G., Krenzin, A., Conversion Tax Law, 2020, page 3.

[79] See Gesmann-Nuissl, D., Compendium Wirtschaftsprivatrecht, 2022, pages 553 f.

[80] See Schnorbus, Y., Analogy Ban, 2001, DB, No. 54, page 1654.

[81] See Gesmann-Nuissl, D., Kompendium Wirtschaftsprivatrecht, 2022, pages 316 et seq.

[82] See Gesmann-Nuissl, D., Compendium Wirtschaftsprivatrecht, 2022, page 554.

[83]3 See draft law UmwBerG, of 01.02.1994, BT-Drucks. 12/6699, page 71.

[84] See draft law amending the conversion tax law of 24.02.1994, BT-Drucks. 12/6885 page 1.

[85] See Brähler, G., Krenzin, A., Conversion Tax Law, 2020, page 17.

[86] See Oser, P., Der Formwechsel im Umwandlungrecht, 2022, StuB, No 9, page 322.

[87] See Ettinger, J., Schmitz, M., Restructurings, 2019, page 272.

[88] See Huber, S., Rinnert, A., Legal forms and choice of legal form, 2019, page 249.

[89] See Sagasser, B., Bula, T., Brünger, T. R., Transformationen, 2011, pages 1252 et seq. Recital 16-20.

[90] See Madl, R., Conversion Tax Law, 2012, p. 10.

[91] See Oser, P., Der Formwechsel, 2022, StuB, No. 10, page 370.

[92] See BFH, judgment of 04.12.1996, II B 116/96, BStBl II, 1997, p. 661.

[93] See Sagasser, B., Bula, T., Brünger, T. R., Transformationen, 2011, page 1249, paragraph 4.

[94] See Kussmaul, H., Business Taxation, 2014, p. 638.

[95] See Gehrmann, R., Fusion, NWB, 08/2022, NWB SAAAB-26813, p. 2.

[96] See Bünning, M., Eckl, P., Fox, T., Weyde, D., Conversion Tax, 2013, page 49.

[97] See Zimmermann, R., consequences of a downward merger, 2018, BBK 20/2018, page 964.

[98] See Pelka, J., Beck`sches Steuerberater Handbuch, 2013, page 1633, paragraph 92.

[99] See Sagasser, B., Bula, T., Brünger, T. R., Transformationen, 2011, page 155, paragraph 41.

[100] See Pelka, J., Beck`sches Steuerberater-Handbucch, 2013, page 1634.

[101] See Merger Directive of 26.10.2005, 2005/56/EC, page 1.

[102] See Seija, M., Cross-border merger, 2013, NWB 23/2013, page 1820.

[103] See Hruschka, F., conversions, 2012, DStR, No. 2/2012, page 4 f.

[104] See BFH, judgment of 9 December 2015, XR 56/13, BStBl II, 2016, p. 967.

[105] See Prangenberg, A., Aldenhoff, M., Steuerliche Grundlagen der Umwandlung, 2005, page 16.

[106] See Prangenberg, A., Aldenhoff, M., Steuerliche Grundlagen der Umwandlung, 2005, page 17 f.

[107] Cf. Behrens, S., Property Transfer Tax Practice Cases, 2019, DB, No. 34/2019, page 1874.

[108] See Prangenberg, A., Biermann, S., Grundzüge der Unternehmensbesteuer, 2003, page 36.

[109] See Prangenberg, A., Aldenhoff, M., Steuerliche Grundlagen der Umwandlung, 2005, p. 57.

[110] See Ott, H., Weber, W., Case Sammlung Umwandlungssteuerrecht, 2012, page 61.

[111] Cf. Fronhöfer, M., Widmann, S., Mayer, D., conversion law, 2014, § 4 UmwStG, paragraph 9.

[112] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A., Conversion Tax Act, 2019, § 3 Rz. 87.

[113] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A., Conversion Tax Act, 2019, § 3 Rz. 95.

[114] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A., Conversion Tax Act, 2019, § 3 Rz. 90.

[115] See Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., Conversion Tax Law, § 3 UmwStG, paragraph 13.

[116] See Desens, M., Gemeiner Wert bei Transformationen, 2007, GmbHR, Nr. 22/2007, page 1202 et seq.

[117] Cf. Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., Conversion Tax Law, § 3, Rz. 15.

[118] Cf. Stadler, R., Elser, T., Bindl, E., Vermögensübertragung bei Mergeren, 2012, DB Supplement, No. 1/2012, page 14 et seq.

[119] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314.

[120] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A., Conversion Tax Act, 2019, § 3 Rz. 126 f.

[121] See Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., Conversion Tax Law, § 3, paragraph 48.

[122] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 3 para. 136f.

[123] Cf. Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., conversion tax law, § 3, paragraph 29.

[124] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 3 para. 103.

[125] See Mertgen, O., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 3 paragraphs 73 et seq.

[126] See draft law SEStG of 09.11.2006, BT-Drucks. 16/2710, 16/2934, page 37.

[127] Cf. Hruschka, F., conversions, 2012, DStR, No. 2/2012, page 4 f.

[128] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 Rz. 203.

[129] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 Rz. 40.

[130] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 paragraph 41.

[131] Cf. BMF, letter of 30.11.2017, IV C 6 -p. 2133/14/10001, BStBl I, 2017, page 1619.

[132] See Dürrschmidt, R., Mückl, N., Weggenmann, H., UmwStG, 2022, paragraph 123.

[133] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 Rz. , 172 .

[134] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 Rz. 169.

[135] See Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., Conversion Tax Law, § 4 UmwStG, paragraph 34 f.

[136] See Blumenberg, H., Schäfer, C., Benz, W., Das SEStEG, 2007, page 120 et seq.

[137] See Damas, J.-P., Einführung, 2007, DStZ, Nr. 05/2007, page 129 et seq.

[138] Cf. Schwedhelm, R., Die Unternehmenswandellung, 2016, paragraph 1423.

[139] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 paragraph 318.

[140] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4, paragraph 295.

[141] See Bonhardt, M., Haritz, D., Menner, S., Bilitewski, A. Conversion tax law, § 4 Rz 356.

[142] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, Rz 03.14-03.24.

[143] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, Rz 03.27.

[144] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 03.29.

[145] Cf. BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 11.06 in V. m.

[146] See Ritzkat, U., Credit Method, 2019, NWB, No. 04/2019, page 2.

[147] Cf. Wilke, K.-M, Weber, J.-A., International Tax Law, 2016, page 13.

[148] Cf. Gehrmann, R., Formwechsel, 2022, NWB, Nr. 08/2022, page 6.

[149] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 04.01.

[150] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraphs 04.09-04.17.

[151] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 04.27.

[152] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraphs 04.44-04.45.

[153] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 18.02.

[154] See BFH, judgment of 28.04.2016, IV R 6/13, BStBl II, 2016, page 725.

[155] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 05.05.

[156] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraphs 04.06-04.08.

[157] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, Rz 07.01-07.09.

[158] See BMF, letter of 25.03.1998, IV B 7 – S 1978, BStBl. I, 1998, page 268, paragraph 11.20.

[159] See FinMin Brandenburg, Decree of 28.05.2014, 35-S 1978-1109, DStR, 2015, page 586.

[160] See Slabon, G., Haritz, D., Menner, S., Bilitewski, A., Conversion Tax Act, 2019, § 2 Rz 46.

[161] See BFH, judgment of 17.01.2018, I R 27/16, BStBl II, 2018, p. 449.

[162] See decision recommendation of 27.05.2020, BT-Drucks. 19/19601, 2020, pages 1 ff.

[163] See Corona Tax Assistance Act of 29.05.2020, BT-Drucks. 290/20, 2020, pages 1 ff.

[164] See GesRGenRCOMVV v. 20.10.2020, BGBl I, 2020, No. 48 page 2258.

[165] Cf. Stratz, R. C., Hörtnagl, R., Schmitt, J., Conversion Law, 2018, page 1472, paragraph 100.

[166] Cf. Schloßmacher, S., Schmitt, J., Conversion Tax Decree, 2011, page 68.

[167] Cf. Schloßmacher, S., Schmitt, J., Conversion Tax Decree, 2011, page 74.

[168] See BMF, Letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 18.01.

[169] See BFH, judgment of 17.01.2019, III R 35/17, BStBl II, 2019, page 407.

[170] See BFH, judgment of 28.04.2016, IV R 6/13, BStBl II, 2016, page 75.

[171] Cf. Act for the Modernisation of the Corporate Tax Act v. 25.062021, BGBl 2021, Part I, No. 37, page 2050-2055.

[172] See Hey, J., Tipke, K., Lang, J., Steuerrecht, 2021, paragraph 13.168 et seq.

[173] See Wacker, R., Corporate Tax Reform, 2019, DStR 2019, page 585 f.

[174]Cf. Draft law on the modernisation of corporate tax law, of 19.052021, BT-Drucks.19/28656, page 19.

[175]Cf. Draft Law on the Modernisation of Corporate Tax Law, 19.052021, BT- Drucks.19/28656, page 13.

[176] See draft law on the modernisation of corporate tax law, of 19.052021, BT- Drucks.19/28656, page 1.

[177] See BFH, Decision of 25.06.1984, GrS 4/82, BStBl II, 1984, pages 751, 762.

[178] See BFH, Decision of 03.07.1995, GrS 1/93, BStBl II, 1995, p. 617.

[179] See Wacker, R., Habersack, M., Hommelhoff, P., FS für Wulf Goette, 2011, page 561 ff.

[180] See Wacker, R., Schmidt, L., EStG, 2017, § 15a 163.

[181] See Reiß, W., Kube, H., Morgenthaler, G., Mellinghof, R., FS für Paul Kirchhof, 2013, pages 1925, 1932.

[182] See Wacker, R., Schmidt, L., EStG, 2017, § 15a, paragraph 161.

[183] See Hüttermann, R. Income calculation for companies, DStJG, No. 34, 2011, pages 291, 303.

[184] See SolZ1995 v. 10.12.2019, BGBl I, 2019, No. 46, page 2115.

[185] Cf. Schneeloch, D., Frieling, M., Income, Church Tax, and Solidarity Supplement, 2021, DB 2021, No. 74, page 1.

[186] See Second Corona Tax Assistance Act of 29.06.2020, BGBl I, 2020, page 1512.

[187] See Böhmer, J., Trennprinzip, 2012, StuW, 1/2012, page 33.

[188] See Wacker, R., Schmidt, L., EStG, 2017, § 34a, paragraph 6.

[189] See Kahsnitz, M., KöMoG, 2021, NWB 2021, No 29, page 2100.

[190] See Fechner, U., Bäuml, S., Corporate Tax Reform, 2008, DB, No. 31/2008, page 1652 f.

[191] See Dörfler, H., Graf, R., Reichl, A., Steuer von Personenunternehmen, 2007, DStR 2007, pages 645, 650.

[192] Cf. Patt, J., Dötsch, E., Pung, A., Möhlenbrock, R., Umwandlungssteuerecht, § 25 Rz. 2.

[193] See BMF, letter of 11.11.2011, IV C 2 – S 1978b/08/1001, BStBl I, 2011, page 1314, paragraph 00.02.

[194] Cf. Mössner, J. M., Oellerich, J., Valta, M., Corporate Tax Law Comment, 2021 § 1a Rz 23.

[195] See recommendation of 19.05.2021, BT-Drucks. 19/29843, page 49.

[196] See Müller, S., KöMoG, 2021, NWB Nr. 30, pages 2190 ff.

[197] Cf. BMF, Letter of 20.11.2019, IV C 6 – S 2241/15/1003, BStBl I, 2019, page 1291, paragraph 29.

[198] See Teschke, M., Kanzler, H. J., Kraft, G. Bäuml, O., Marx, F. J., Hechtner, F., Geserich, S., Income Tax Law, 2022, § 6 Rz 323.

[199] Cf. BMF, Letter of 20.11.2019, IV C 6 – S 2241/15/1003, BStBl I, 2019, page 1291, paragraph 29.