date | theme

14. October 2020 | Growth in partnerships: general legal succession and design possibilities

15. October 2020 | Conversion Law: Significance and Application in the Transformation of Enterprises

02. November 2020 | Merger of two corporations

12. January 2021 | Conversion Tax Act – Scope and Exceptions

14. January 2021 | Tax neutral merger: converting GmbH into partnership

16. February 2021 | How to save the loss carry forward in the transformation of your company

05. April 2021 | The tax-neutral transfer of assets according to § 6 para. 5 EStG (this contribution)

Individual companies and partnerships often wish to regulate the structure of the company. However, there is often legal uncertainty or a lack of timely planning. § 6 Abs. 5 EStG is an instrument of choice in order to bring about a systematic corporate structure. The provision of § 6 para 5 S. 1 and S. 2 EStG allows transfers of assets between different assets to book values. Such arrangements shall facilitate operational restructuring. [1] This allows a taxable person who has several holdings and/or holdings in co-entrepreneurships to move the assets used for business between the various holdings and special business assets as required and without revealing the hidden reserves. [] 2]

Even before the introduction of the standard, it was recognized that the transfer of assets between two operating assets, i.e. special business assets of the same taxpayer would not lead to withdrawal and thus to book values. [3] In this context, the BFH considered the non-recognition of the hidden reserves for business tax to be indifferent. [] 4]

§ 6 Abs. 3 – 6 EStG enables the transfer of assets between the taxpayer’s own business assets/special business assets and the total assets of a co-entrepreneurship in which he participates (§ 6 para. 5 p. 3 no. 1 and 2 EStG), as well as the free transfer between the special business assets of different co-entrepreneurs of the same co-entrepreneurship (§ 6 para. 5 p. 3 no. 3 EStG. 5]

In accordance with general principles, an asset transferred free of charge from an operating asset to the total assets of a co-entrepreneurship leads to a profit-making withdrawal in the ceding operating asset and a deposit in the receiving operating asset. Notwithstanding this, case law applied to these cases even before the insertion of § 6 para. 5 pp. 3 ff. EStG has a broad concept of operation, because here too the taxpayer and the co-entrepreneurship do not confront each other like third parties, but the transfer is caused by the company relationship. [6] As a result, BFH also enabled a continuation of book value in these cases.[7] Condition for the applicability of § 6 para. 5 EStG is that the taxation of the hidden reserves of the economic asset is ensured. [] 8]

When applying § 6 para. 5 EStG is to distinguish between a transfer and a transmission. The requirement for a transfer or transfer is described in more detail in chapter 1.2.3 or 1.3.

The provisions of § 6 Abs. 5 Transfers and transfers covered by the EStG can be carried out by natural persons, partnerships and corporations. However, co-entrepreneurs and corporations regularly have only a single, uniform business assets, whereby the transfer of assets between the business assets of the same taxpayer acc. § 6 para 5 S. 1 EStG. Transfer processes can in principle be carried out in accordance with § 6 Abs. 5 S. 3 EStG also (double-storey) co-contractors and corporations. However, in the case of a transfer involving limited liability companies, the legal principles of the hidden distribution of profits and the hidden contribution must be observed. [9] Furthermore, it is irrelevant whether the asset is fixed or working capital. In addition, self-created, non-accountable assets of fixed assets as well as assets recorded in aggregate items are included in the scope of § 6 para. 5 is assigned to EStG. [10]

1.2. Transfer according to pp. 1 and 2 of the regulation

1.2.1. Transfer of individual assets

When a single asset is transferred between different business assets of the same taxpayer, the value of the asset transferred is to be used as determined by the profit determination rules. [11] The designation of the economic good[12] and the business assets[13] results from the general principles. Although the provision clearly relates to individual assets, there are no grounds for profit realisation if several assets, branches or shares of the company are transferred between different assets of the same taxpayer. [14] A merely temporary use of an asset of an establishment in another establishment of the same taxable person is not covered by S. 1 or S. 2 (in the absence of a permanent transfer of the asset). Rather, this involves a withdrawal of use at the transferring operating assets and an expense contribution at the receiving operating assets. [] 15)

For the applicability of § 6 para. 5 EStG, the question of whether there is unlimited or limited tax liability is not decisive.[16] § 6 para 5 pages 1 and 2 EStG generally refers to a natural person who maintains several companies. [17] The holdings may belong to different types of income, but the taxable person must prepare his own profit calculation for each holding. [18] The taxable person has no right of choice to discover the hidden reserves on the basis of the regulation in S. 1. [] 19]

Since § 15 para. 3 No. 1 EStG Co-entrepreneurships in principle have only one company, can transfers in accordance with § 6 para. 5 S. 1 EStG does not arise. [20] If a taxable person is involved in several joint ventures and has the intention to transfer assets between their business assets, not p. 1, but p. 2 (transfer between special business assets) or p. 3 (transfer between total assets of sister partnerships); More in this regard in chapter 1.3. 21]

In the case of unrestrictedly taxable corporations, § 8 para. 2 KStG only a commercial business assets, so that § 6 Abs. 5 S. 1 EStG is not applicable. On the other hand, a continuation of book value as defined in § 6 para. 5 lit. 1 EStG in the case of limited-tax companies, since they may, for example, operate a LuF business (§ 49 para 1 no. 1 EStG) and a commercial business (§ 49 para 1 no. 2 a EStG) in Germany. [] 22]

1.2.3. Legal consequence of the provision

If the requirements of § 6 para. 1 EStG stipulates that it is mandatory to use the value resulting from the rules on profit determination; In other words, the book value is to be continued.[23] S. 2 of § 6 Abs. 5 EStG extends the legal consequence of S. 1 to the transfer from a taxpayer’s own business assets to his special business assets in the case of a joint venture (and vice versa) as well as the transfer between different special business assets of the same taxpayer in the case of different joint ventures. The legal consequences of § 6 para 5 p. 1 and 2 EStG show whether a transfer or transfer has taken place.

In principle, a transfer is referred to if there is no change of legal entity. [24] § 6 para. 1 EStG covers the fact that the assets are transferred to another business asset of the same taxpayer. Accordingly, the change of legal entity is excluded and at the same time indicates that the civil or economic ownership of the economic good is not transferred to another taxpayer. [] 25]

§ 6 Abs. 5 p.2 EStG there is also a lack of a change of legal entity, as a result of which the same legal principles apply as in p.1. The depreciation method and pre-ownership periods acc. § 6b EStG and the like.[27] Although the transfer to another company actually constitutes a withdrawal;[28] a profit realization is not required in application of the final withdrawal term. [] 29]

Compared to transfers under S. 3 and transfers under S. 1, there is no distinction between paid and free operations. Therefore, the simultaneous assumption of liabilities for the book value continuations is harmless. [] 30]

1.2.4. Taxation of unsecured hidden reserves

If the hidden reserves of the economic property available at the time of transfer are not subject to taxation, § 6 para. 5 pp. 1 and 2 EStG. Such a situation exists, for example, if a taxpayer now relocates an asset of his domestic permanent establishment to his foreign permanent establishment (§ 6 para 5 p. 1 in the V. m. § 4 para). 1 p. 4 EStG).[31] It is necessary to use the general principle according to which the disposal from the operating assets of origin is to be regarded as an extraction. Therefore, the exclusion of the dt. taxation right without simultaneous transfer to another establishment is not from p. 2 but covered by § 4 Abs. 1 pp. 3 and 4 EStG is treated as an extraction. [] 32]

1.3. Transfer according to sentence 3 of the provision

1.3.1. Purpose and purpose

According to the provision of § 6 para 5 S. 3 EStG, S. 1 applies accordingly – and thus the compulsory continuation of the book value – insofar as an individual economic good, free of charge or against granting or reducing company rights, is transferred from an operating assets of the joint entrepreneur into the total assets of a joint entrepreneurship and vice versa. [33] This standard covers cases in which the co-entrepreneur (natural person, partnership or corporation) also has a business and participates in a co-entrepreneurship as a co-entrepreneur. [34] For transfers pursuant to § 6 Abs. 3 EStG a change of legal entity takes place, i.e. a transfer of legal or economic ownership. Thus, an interpersonal shift of silent reserves takes place at least partially. [] 35

1.3.2. Free of charge

In the case of non-remuneration, it is crucial that no consideration has been granted to the person who transferred the economic good and that the transfer takes place primarily without granting/minimizing company rights. [36] For the application of S. 3, it is irrelevant whether it is a (real) donation or a transfer of assets that is settled via a reserve account that is bound as a whole. For use cases, it could be largely limited to family partnerships, intra-group transfers and one-person companies.[37] Without the provision of S. 3, transfers free of charge between individual goods and total assets would be treated as withdrawals or transfers. Deposits are assessed.[38] If special assets are transferred free of charge (i.e. without any change in the shareholding of the joint venture), there is no transfer of a share of the joint venture.[39] If the requirements of § 6 para 5 p. 3 EStG are fulfilled, the transfer takes place at book value. Otherwise, this is a removal in this case. § 16 Abs. 4 EStG and § 34 EStG are not applicable. [40]

In the case of an agreed fee that is below the market value, there is talk of a partial transfer. It is questionable how this in view of § 6 Abs. 5 S. 3 EStG. This aspect is subject to a different view of the BFH, again with different views of two senates and the BMF.[41] The BMF applies the strict separation theory, in which the unitary operation is separated into a paid and free part; This is done in proportion to the consideration given to the partial value.[42] The book value is then divided accordingly between the two parts. As regards the part of the asset in return for payment, the seller may thus accrue a profit equal to the difference between the purchase price and the book value of the asset in proportion to the part in return for payment; the acquirer shall recognise the part acquired in return for payment at the cost. The part transferred free of charge has the acquirer with the book value acc. § 6 Abs. 5 S. 3 EStG to be continued.[43]

The modified separation theory basically has a similar approach to the strict one, but this does not lead to taxation for part-paying transactions if the part-payment does not exceed the entire book value. [44] Furthermore, it seems contradictory that, although the transfer operation is first to be divided into a free part and a paid part, the book value of the asset is then allocated exclusively to the paid part, despite the division of the transfer operation. In addition, the application leads to incomprehensible legal consequences if the purchase price falls below the book value of the transferred asset. [] 45

However, these incomprehensible legal consequences can be avoided by a modification of the modified separation theory, according to which the book value is assigned to the paid part of the transfer operation only up to the amount of the part of the transfer operation and otherwise to the free part of the transfer operation. [46] If the basic idea of the modified theory of separation still requires further modification in order not to bring about obviously system-impaired results in the initial constellation, this shows that the modified theory of separation is in fact not a coherent explanatory model. The theories dispute was the subject of proceedings in the large Senate of the BFH.[47] Currently, it is not foreseeable when another case will come to the big Senate and thus to the discussion. [] 48]

Transfers of this kind (e.g. economic goods are exchanged for company shares) are treated as free transfers within the scope of S. 3, although they are exchange-like (§ 6 para.) 6 EStG) acts as an act.[49] The restriction of the principle of realization is justified by the idea of continuing entrepreneurial commitment in another form. [50] The priority of para 5 aggregate exchange operations is given in § 6 para. 4 S. 4 EStG. [] 51]

Company rights are granted or reduced if the transfer is credited or debited to the capital account of the shareholder, which is relevant for his participation in the total assets; this is the capital account I.[52] Likewise, a grant of company rights can be assumed if the value of the asset is attributed to both the capital account I and the capital account II. [53] Should in a transmission process a so-called If there is a mixed charge, this is to be divided. A mixed fee exists if a purchase price is paid in addition to the granting/reduction of company rights. [] 54]

In respect of the part of the asset that is transferred against payment of the purchase price,[55] there is a sale operation which may lead to the realisation of a capital gain on the part of the transferring entity; Accordingly, the acquirer shall recognise the asset at the acquisition cost. the other part of the asset is also subject to a payment transaction in the form of a swap transaction; However, this will be done according to § 6 Abs. 5 S. 3 EStG at book values. [56] In the case of a mixed remuneration, hidden reserves can only be realised to the extent that the purchase price payment exceeds the book value corresponding to the purchase price payment. [] 57]

1.3.4. Closure period

In the case of transfer operations i. d. S. 3, the blocking period according to § 6 para. 5 S. 4 EStG. In this context, the transferee must neither remove the transferred asset from the business assets nor sell it within the blocking period, which ends 3 years after the transferor has submitted the tax return for the assessment period of the transfer[58]; otherwise, the partial value of the asset is recognised retroactively at the date of the transfer (§ 175 para 1 p. 1 no. 2 AO).[59] The purpose of the scheme is to exclude the advantage in those cases where the earlier transfer was not intended to restructure while maintaining the business structure but to prepare and tax-advantageously organise a sale or withdrawal. [] 60]

In the opinion of the BMF, there is no violation of the embargo period in the following cases:[61]