date | theme

25. March 2021 | The transfer of assets according to § 6 para. 5 EStG and §§ 20 / 24 UmwStG (this contribution)

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

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

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

02. November 2020 | Merger of two corporations

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

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

The provision of § 6 para. 5 EStG enables the transmission, i.e. Transfer of assets between different business assets/ special business assets to book values. § 20 UmwStG concerns the transfer against granting of company rights to a limited liability company. [1] Contrary to § 6 Abs. 5 EStG, § 24 UmwStG covers the contribution of all kinds of the joining partner to a partnership against the granting of company rights. Often partnerships are also called co-entrepreneurships; This includes GbR, OHG, KG, GmbH & Co. KG. In determining the ratio of § 6 Abs. 5 EStG with regard to the norms of the UmwStG, a differentiation is made as to whether the relevant transaction falls within the scope of § 20 UmwStG (see chapter 1.1.) or into § 24 UmwStG (see chapter 1.2.).

The regulations of § 20 UmwStG are compared with the regulations for the transfer of assets acc. § 6 Abs. 5 EStG to be applied in priority. [2] In the case of a contribution of a co-entrepreneur's share in which assets of the necessary or arbitrary special business assets are retained by the co-entrepreneur, it must be taken into account that the co-entrepreneur loses the legal status of co-entrepreneur with the contribution of the co-entrepreneur's share and thus the special business property of the retained special business assets ends with the expiry of the transfer date. If the contributor of the co-entrepreneur share is a corporation or be a partnership, the operating property of the previous special operating assets will be retained. In both cases, the assets are transferred to the corporation or partnership at book value (§ 6 para.). 5, p. 2 EStG.[3]

If a natural person contributes a full share of the co-entrepreneur, the legal consequences correspond to those of the contribution of a business. Therefore, the discovery of the hidden reserves in the assets retained in the special business assets on the tax transfer date can be avoided only if this business assets are transferred to other business assets of the natural person. [4] Due to the rules on back-relation, which are contained in § 20 para 5, 6 UmwStG, taxpayers have the possibility to arrange individual and collective succession-related contributions in such a way that the final balance sheet of the submitter can be drawn up on 31.12. of the previous year or another final date. [] 5]

§ 20 para 5 s. transfers of an asset to the other business assets of the contributor after the tax transfer date. However, § 20 para 5 S. 2 UmwStG provides an exception to para. 5 p. 1 insofar as withdrawals and deposits are made after the tax transfer date. [6] In principle, the assets deposited are to be valued at the partial value (§ 6 para 1 no. 5 EStG). On the other hand, free deposits originating from another business asset of the same taxpayer are to be recognised with the book value acc. § 6 Abs. 5 pages 1 EStG.[7]

If the contribution in kind (§ 20 UmwStG) is made at book or intermediate value, the provision of § 6 para. 5 EStG (more details on the possibilities of § 6 para 5 S. 3 EStG in chapter 3.3) should be particularly noted. If an economic good is in accordance with § 6 para. 5 EStG is brought within seven years into a corporation, according to § 6 para. 6 EStG retroactively recognise the partial value of the assets transferred at that time instead of the book value. [8] If operating assets are transferred to a corporation or cooperative, this constitutes a transfer operation within the meaning of § 6 para. 5 p. 6 EStG. If an asset belongs to the transferred assets in accordance with § 6 para. 5 S.3 EStG and if the contribution in kind is made before the expiry of the seven-year period, the book value of the asset in question changes retroactively (cf. § 6 para 5 S. 1 EStG).[9]

This results in a subsequent increase for the book values of the transferred operating assets and for the acquisition costs of the shares granted in return in the acquiring company. Accordingly, at the level of the transferring entity, a realisation of profit can also occur if the receiving company recognises the transferred assets at the book value. [10] It is questionable whether the legal consequences of § 6 para. 6 EStG can only be triggered if the acquiring company recognises the transferred asset at book value or an intermediate value[11], or whether it also comes retroactively to partial value recognition in cases where the purchaser recognises the transferred assets at the common value by uncovering the hidden reserves. [12] In principle, the first-mentioned opinion of § 6 para. 6 EStG: The provision is intended to prevent economic goods from first being transferred tax-neutrally from a special business asset/business asset into the total business asset and then into a corporation as part of the business asset of this company. [13] As a result of this provision, the beneficiaries, § 3 no. 40 letter. a-c EStG and § 8b Abs. 2 KStG for the sale of shares in limited liability companies, in the end also applied to the sale of other assets. [14] In view of the telos of § 6 para. 6 EStG, to oppose abusive arrangements, it is appropriate to limit the scope of application of the provision to those cases in which a corresponding abuse is possible.

Therefore, transfers within the seven-year period are only harmful insofar as v. § 6 para. 6 EStG, when, within the framework of the preceding transfer of the individual economic good, the hidden reserves dormant in it have not been discovered. Such a situation exists only if the asset has been recognised in the balance sheet of the co-entrepreneurship with the book value or an intermediate value. However, if there is a transfer with complete discovery of the hidden reserves, the scope of § 6 para. 5 S. 6 EStG not opened; a transfer to a corporation is not harmful even if it takes place within the blocking period. [] 15)

§ 6 Abs. 5 EStG, in contrast to § 24 UmwStG, regulates the transfer of individual assets. If the requirements of § 6 para 5 EStG are met, the transfer takes place at book values. If company rights are granted during the transfer, there is an exchange-like operation.[16] In principle, § 6 para. 5 EStG also applicable to transfers of material groups. [17] If liabilities are transferred at the same time in this context, the tax administration[18] considers that in this respect there is a consideration which does not consist of company rights and the hidden reserves must be realised. [19] However, if the requirements of § 24 UmwStG are met at the same time in the transaction, § 24 UmwStG is to be applied primarily.[20] Accordingly, the assumption of the liabilities of the transferred entity does not lead to the discovery of the hidden reserves under § 24 UmwStG.[21]

§ 24 UmwStG contains, in contrast to § 6 para. 4 – 6 EStG neither a holding period nor a corporate tax clause. Should it subsequently turn out that the requirements of § 24 UmwStG were not fulfilled (e.g. because there was no partial operation), the transaction may be carried out in accordance with § 6 Abs. 5 S. 3 EStG at book value. [] 22]

In the case of a contribution of a 100 % shareholding, the tax administration assigns this operation to § 24 UmwStG, which is not explicitly requested in accordance with § 24 para. 2 UmwStG at common value. If there is an intention to set the book value, an application in accordance with § 24 para. 2 UmwStG. In the case of a court dispute, it would be possible that the court would join a BFH judgment falling in this context[23] and instead of § 24 UmwStG § 6 para. 5 EStG declared applicable.

As a result of this opinion and the resulting legal consequences of § 6 para. 5 EStG, the book values are to be used and any blocking periods for subsequent restructurings are to be observed. [] 24]

2nd Conclusion

Based on the insightful discussion of §§ 6 para. 5 EStG, 20 and 24 UmwStG, a delimiting view of the scope of these standards is possible. There are some different aspects to this. First, the aspect that § 6 Abs. 5 EStG mainly transfers individual assets and that §§ 20 and 24 UmwStG require the granting of company rights. The transfer of individual assets can be carried out in accordance with § 6 Abs. 5 S. 1 and 2 EStG are also free of charge. 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.