In principle, there is no overlap between § 6 Abs. 3 EStG and §§ 20, 24 UmwStG. Under § 6 Abs. 3 EStG excludes the free transfer of enterprises/sectors and (sector) co-entrepreneur shares. § 20 UmwStG concerns the transfer against granting of company rights to a limited liability company. [1] Contrary to § 6 Abs. 3 EStG, § 24 UmwStG covers only a contribution of the entering shareholder against the granting of company rights into a partnership. Often partnerships are also called co-entrepreneurships; This includes GbR, OHG, KG, GmbH & Co. KG. However, one can only arrive at a legally secure solution if the correct standard is subsumed.

Individual companies convert into GmbH or GmbH & Co. KG?

1. Transfer without charge according to § 6 para. 3 EStG

1.1. In relation to § 20 UmwStG

As already mentioned, there is in principle no overlap between § 6 para. 3 EStG and § 20 UmwStG, since the latter only covers contributions against the granting of shares in a capital company (in kind contribution § 20 para 1 UmwStG). [2] The provision of § 6 Abs. 3 EStG plays a role in relation to § 20 UmwStG, however, if the co-entrepreneur leaves during the retroactive effect period.

The following example is primarily intended to illustrate the free departure of a co-entrepreneur and then explain the resulting consequences.

Example:[3]

O-OHG involves O, Y and A as co-entrepreneurs. On 01.04.01 O transfers his share of the co-entrepreneur free of charge in accordance with § 6 para. 3 EStG to H. A and H will contribute their co-entrepreneur shares to P-GmbH at the end of 31.7.01 with effect from 1.1.01.

The re-relation of the contribution in kind to 01.01.01 and thus to a time when H was not yet a co-contractor is permitted. [] 4]

In the case of a free transfer of the share of the co-entrepreneur in the sense of § 6 para. 3 EStG, the acquirer must continue the book value of the co-entrepreneur share. Therefore, there is no capital gain at the level of the outgoing co-entrepreneur. However, the outgoing co-entrepreneur must tax the current profit he earns in the period between the backward transfer date and the transfer as a profit share in the uniform and separate profit determination at the co-entrepreneurship. If the co-entrepreneurship is lost as a result of the contribution in kind, the uniform and separate determination must be carried out only for the purpose of determining the profit of the outgoing co-entrepreneur. [] 5]

In principle, the tax retroactive effect constitutes a contribution in accordance with § 20 para. 1 UmwStG ahead. In accordance with the illustrated example and the consequences resulting therefrom, if a co-entrepreneur by a free transfer in accordance with § 6 para. 3 EStG leaves the partnership before the transfer[6], he does not participate in the transfer and thus in the tax retroactive effect. The provision of § 15 para 1 s. 1 no. 2 EStG shall continue to apply mutatis mutandis to shareholders who retire from co-entrepreneurship during the retroactive period. [7] If the income of the acquiring corporation is determined, the results of the transactions still attributable to the outgoing co-entrepreneur shall be excluded. [] 8]

That between § 6 para. 3 EStG and § 24 UmwStG basically do not overlap, has already been mentioned. Because while the provision of § 6 Abs. 3 EStG covers free transfers of material groups,[9] § 24 UmwStG presupposes a contribution from the joining shareholder, and according to the statutory wording only in the form of (partial) companies or co-entrepreneur shares, whereby the case-law and financial administration also leave money deposits in the scope of § 24 UmwStG. [10] If such a situation exists, § 6 Abs. 3 EStG (including the special regulation of § 6 Abs). 2 EStG for special assets retained. Without such a contribution of the substitute, the acquisition of the co-entrepreneur status as a free transfer of partial shares in accordance with § 6 para. 3 EStG; § 24 UmwStG is then not applicable. [] 12]

In addition, the requirements of § 24 UmwStG are not fulfilled if the contributor does not receive new company rights, e.g. if a business is transferred to his own special assets free of charge. [13] The contributor must therefore necessarily obtain a co-entrepreneurship position with the receiving partnership or extend his previous position. In principle, therefore, it can be assumed that both provisions have a different scope of application.

The substantive scope of application differs in the fact that, in general opinion, a transfer constitutes a transaction similar to a swap, so that the transaction is remunerated. [14] In this case, the common values are to be used as a legal consequence (§ 24 para 2 S. 1 UmwStG), whereby the legislature grants the taxpayer a right of choice (intermediate value or book value) under certain conditions – on request. [] 15)

There may be an overlap of the two regulations in peripheral regions. This is the case if a taxpayer intends to bring his sole proprietorship into a partnership. [16] If the submission is made in order to receive another person (gift-by-gift) as a co-entrepreneur[17], a case of § 6 para. 3 EStG. If the individual enterprise is contributed by the contributor only for the purpose of obtaining co-entrepreneur shares, there is a case of § 24 UmwStG.[18] In this respect, mixed cases are also conceivable in which the contributor contributes his individual enterprise partly for his own account, partly for the benefit of another person. [19] A combination of the two requirements is possible if e.g. a company is brought into a co-entrepreneurship (in this respect application of § 24 UmwStG) and at the same time members are accepted into the co-entrepreneurship free of charge (§ 6 para. 3 EStG.[20] These are two processes which must be assessed legally separately. [21] In this case, the hosting co-entrepreneurship can also choose an approach above the book value (e.g. useful for loss carry forwards). 22]

If a part-operation or a co-entrepreneur share is issued to a co-entrepreneur without this entailing the dissolution of the co-entrepreneurship and despite the relinquishment neither the co-entrepreneurship status is reduced nor a claim of the co-entrepreneurship vis-à-vis the beneficiary co-entrepreneur is justified (e.g. offsetting the transferred net book value with a total capital reserve), this operation is not in accordance with § 24 UmwStG or § 6 para. 3 EStG,[23] but according to § 6 para. 3 EStG tax neutral under the corresponding conditions possible. [] 24]

2nd Conclusion

Based on the insightful discussion of §§ 6 para. 3 EStG, 20 and 24 UmwStG, a delimiting view of the scope of these standards is possible. Above all, the aspect of granting company rights makes the striking difference between the regulations. § 6 Abs. 3 EStG presupposes the free transfer of material groups, while §§ 20 and 24 UmwStG stand for the granting of company rights. Accordingly, the scope of application covered by §§ 20 and 24 of the UmwStG can be regarded as an exchange-like operation. The difference in the different regulations should serve as a starting point for subsuming the right standard and creating a legally secure solution.