date | theme

06.07.2020 | Lock periods in conversion tax law – contribution in kind and exchange of shares

08.07.2020 | Closure periods for merger and change of form in GmbH & Co. KG: § 6 UmwStG

10.07.2020 | Tax neutral division: What is the blocking period for a split or separation?

12.07.2020 | Conversion of the GmbH into a GmbH & Co. KG: blocking period 5 years!blocking period § 18 Abs. 3 UmwStG (this contribution)

14.07.2020 | Lock period for contributions in kind: § 22 para. 2 UmwStG

16.07.2020 | 7 years blocking period when entering GmbH: § 24 Abs. 5 UmwStG

A corporation (UG, GmbH and AG) can be converted tax-neutrally into a partnership (GbR, oHG, KG or GmbH & Co. KG). This conversion can take place by changing shape, merging or splitting. Taxation of the conversion process can be avoided. However, it should be noted that the new partnership or individual company should not be sold for 5 years afterwards. If this blocking period is nevertheless violated, trade tax will be levied subsequently.

If a corporation transfers assets for book value to a partnership or natural person before its cessation of operation, the business tax-paying task profit that would be incurred by a corporation can be circumvented. This is because hidden reserves of partnerships are subject to income tax when they cease to operate, but not business tax. This design possibility is intended by § 18 Abs. 3 UmwStG can be prevented. [1] In this context, it becomes clear why a capital gain within the five-year period is subject to business tax even if the assuming entity is not subject to business tax. [] 2]

2nd classification of the trade tax lock period

§ 18 UmwStG determines the trade tax consequences of a transfer of assets from a corporation to a partnership, natural person or PartG. Furthermore, the provision applies in the event of a change of legal form of a corporation into a partnership. [3] According to § 18 Abs. 1 UmwStG, §§ 3 to 9 and 16 also apply to the determination of business income. [4] This business income cannot be reduced by the deficits of the current collection period and loss carry forwards in accordance with § 10a GewStG (§ 18 para 1 S.2 UmwStG).[5] In principle, a transfer profit is subject to trade tax. § 18 Abs. 1 UmwStG states, however, that an arising takeover profit or takeover loss is not subject to trade tax. [] 6]

18 par. 3 UmwStG is intended to prevent the abusive circumvention of business tax in the event of the sale or cessation of the operation of a partnership or natural person within five years after the conversion. If sold within the trade tax lock period, the profit is subject to trade tax. [7]

Also capital gains or relinquishments attributable to business assets that existed before the conversion are taxable. [8] This does not include profits from operating activities, even if these are incurred in connection with an operating expense or sale.[9] § 18 para. 3 UmwStG also does not apply to legal entities without business assets. [10] The sale and abandonment of subsidiaries or co-entrepreneur shares are also subject to para. 3 sentence 2 is affected by the holding period of five years. [11] When determining the profit according to § 18 Abs. 3 UmwStG in conjunction with § 7 S. 1 GewStG is the allowance according to § 16 Abs. 4 S. 1 EStG should not be taken into account. [12] The resulting trade tax measurement amount may not reduce the income tax according to § 35 EStG. [] 13]

4th Trade Tax Lock Period: Conclusion

In summary, it can be stated that the transfer of assets from a corporation to a partnership acc. § 18 para 1 p. 1 in the V. m. § 3 para. 1 umwStG at book value. Since the sale or abandonment of the operation, part-operation or co-entrepreneurship in a partnership acc. § 7 S. 2 GewStG is not subject to trade tax, the legislature has with the trade tax lock period of five years i. S. d. § 18 para. 3 UmwStG prevents the abusive circumvention of business tax liability.