date | theme

12. April 2021 | The hidden deposit according to § 8 Abs. 3 S. 3 KStG – Avoid risks (this contribution)

24. June 2020 | Hidden distribution of profits: advantage or disadvantage?

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

25. November 2018 | Taxation of profit distributions from GmbH

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

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

Usually increases and decreases in assets of companies also lead to a change in income. However, this excludes hidden profit distributions (vGA) and hidden deposits (vE). The income of a society is neither increased nor decreased. However, § 27 KStG affects the payment of deposits once made from a company. It should also be noted that some deposits are also subject to taxation. In order to avoid concealed deposits and ensure a guarantee of debt-law relationships between shareholders and company, the following configurations must be observed.

Similar to a hidden profit distribution (vGA), the hidden deposit (vE) is considered. The latter is also founded in the company relationship (see R 8.9 KStR) of a company. Since the hidden capital injection is not initiated by the operational sector, § 8 para. 3 S. 3 ff. KStG, that the profit may not increase as a result. Therefore, any increase in the company’s assets must be examined in accordance with its type of origin. Increases in company law shall be distinguished from those resulting from legal obligations. In the case of limited liability companies in particular, the provision of the hidden contribution is of particular interest.

2nd definition of hidden deposit

A hidden deposit is made according to m. § 8 Abs. 3 S. 3 KStG by a contributable asset advantage. This is provided by a partner or a person close to the company. The hidden capital injection takes place outside the deposits to be made under company law. In addition, the contribution is made without or through a reduced consideration from the company to the shareholder. The external comparison is an important criterion for this. Therefore, a third party would not accept a reduced consideration for its contribution.

A hidden deposit increases the company’s profits under tax law, which is ineffective. As a result, the profit must be reduced off-balance sheet and the shareholder’s tax deposit account increased. The tax deposit account can be seen as a tax-neutral deposit, which can only be paid out after distribution of the entire profit. However, it would be desirable to avoid this constellation, because this capital is very strongly tied up by the ranking of distributions in corporations. § 27 para 1 p. 5 KStG provides in this the profit before the tax deposit account and the share capital. Thus, this is not an optimal way to bring assets into a society.

A hidden deposit can be made exclusively through an accounting asset advantage. An eligible or eligible benefit must either be recognised as an asset or increase an existing benefit. Otherwise, a liability item can also be eliminated or thereby reduced.

3.2 Eligible Asset Benefits – Examples

Eligible asset benefits include capital contributions, contributions in kind (e.g. cars, machinery and land, etc.), claims and exemption from liability. In the category of contributions in kind, free and favourable transfers by the shareholder to the company are classified as a hidden contribution. Accordingly, a property provided free of charge by the shareholder to the company would be a contribution and in accordance with § 6 Abs. 1 point 1 EStG. In addition, should a loan be forgiven to the company, the outstanding settlement amount would be considered a hidden contribution. In addition, according to § 14 Abs. 3 p. 2 KStG, in addition, a compensation item for minor discharges within an organ shaft of a concealed deposit.

3.3. No depositable asset benefits

Non-recognizable assets made available exclusively for use cannot be hidden in a company. In addition, free services are also not eligible asset benefits. The use of free consultations cannot therefore be considered as a deposit. An interest-free loan from a shareholder also represents a particular risk. Interest-free loans are according to § 6 Abs. 1 no. 3 EStG with an interest rate of 5,5 % and thus increase the taxable profit and finally the tax burden of the company. This must be avoided at all costs.

3.4.

The definition of the Eligible Asset Advantage raises the question of related parties. The BFH[1] has spoken out in a judgment for a broad version of the terms. Consequently, any relationship which might have influenced the decision to grant benefits is sufficient. Thus, this relationship can have both family and company law or debt law reasons. Close friends, family members in the broad sense as well as conjugal unions are therefore included.

In the video we explain to you which are the five most important tax advantages in a GmbH and how you can use them.

4. impact of a hidden deposit

4.1. At company level

4.1.1. Concealed deposit – corporation

The hidden contribution plays a special role for corporations. This is because the hidden reserves of the deposited assets are realized. This is followed by an off-balance-sheet correction of the increase in profit, as this is in accordance with § 8 Abs. 3 S. 3 KStG is inadmissible. In addition, a resulting increase in the capital account complicates the payment to the shareholder.

4.1.2. Concealed deposit – partnership

In the case of a partnership, the taxation of existing hidden reserves is ensured by continuing to maintain assets at acquisition costs or book values. Nevertheless, no hidden reserves are initially realized at a partnership. Thus, no off-balance-sheet correction is necessary here.

4.2. At shareholder level

§ 6 Abs. According to Article 6(2) of the EStG, a concealed contribution increases the cost of a shareholder’s shareholding in the amount of the partial value of the eligible asset. In this case, the partial value represents the value which would be used for this one asset if the entire company were purchased. Since this value can be above the current book value, hidden reserves are thus realized. In addition, a hidden contribution can be regarded as a private sale transaction within the meaning of § 23 EStG, which can be followed by taxation of the sale. The specific deadlines for the acquisition and sale of the respective assets must be observed. As a consequence, the impact must be considered on a case-by-case basis and require a more detailed analysis of transactions. We are very happy to help you with this.

5th Open deposit

In contrast to the hidden deposit is the open deposit. This is often done during the formation of a company or in the case of a capital increase. It is customary for company shares to be transferred to the depositor in compensation for the transferred economic good. If necessary, in the event of a capital increase, for example, a company, a part-operation or a share of the company is contributed to the company. However, taxation can be circumvented by the income tax regulations. This is done on the basis of the provisions of the Conversion Tax Act. This is because a process according to FIG. § 20 or § 24 UmwStG. This is to ensure a tax-neutral restructuring of companies. This is not possible with the concealed insert.