date | theme

16. June 2021 | Trust models of large auditing firms: Gift tax relevance (this contribution)

19. May 2020 | Treuhand at the GmbH: Special features of the trust agreement

January 6, 2021 | Trust-KG – Structure and contract basis offers tax advantages

7 January 2021 | The trust model and the trust KG

Large accounting firms and law firms are usually structured as GmbH. The holdings in these companies are then often managed by a trustee. The fiduciary agreement stipulates that the shareholder will only receive back his initially paid €50,000 upon departure. From a tax point of view, the problem is that the share is actually worth much more than 50,000 euros. As a result, the other shareholders, the trustee or the company itself could be objectively enriched, so that a transaction relevant for gift tax purposes within the meaning of § 7 para. 7 p. 1 ErbStG. Ultimately, the result could also have an impact in the event of the growth of a partnership within the meaning of § 738 para. 1 BGB. These are also shown.

Inheritance Tax & Gift Tax: Valuation, Exemptions, Tax Rates

1st design of the trust agreement

Large audit firms and law firms are usually structured as GmbH. The holdings in these companies are then often managed by a trustee. This trustee is a shareholder of the GmbH and forms a pool together with the other shareholders. The trustee holds the shares in the company for the participants. The entering shareholder pays €50,000 for the share in our case at the time of entry.

In the event of the departure of a member, the departing member must transfer the share back to the trustee. The trust agreement regularly stipulates that the shareholders leave the company upon reaching a certain age. In this case, the trustee is to acquire the share externally in his own name, but internally for the remaining shareholders. The task of the trustee is then to hold the company shares for the other shareholders. The outgoing shareholder only receives back his initially paid €50,000. The new entrant must proceed as the retired one. From a tax point of view, the problem is that the share is actually worth more than the € 50,000. As a result, the other shareholders, the trustee or the company itself could be objectively enriched, so that there may be a gift tax relevant transaction.

2. problems with such trust agreements

A donation is deemed to be in accordance with § 7 para. 7 S. 1 ErbStG also the transfer of the share or part of a share in a corporation based on the termination of a shareholder, insofar as the value resulting for the share at the time of termination pursuant to § 12 ErbStG exceeds the right to severance payment. Therefore, by the resignation of the shareholder could be in accordance with § 7 Abs. 7 S. 1 ErbStG taxable acquisition of the limited liability company. Then the company would also have to be an acquirer. Ultimately, it is also a question of whether a purely reflexive increase in the shares of the shareholders is gift controllable. It must therefore be examined whether the transfer of the share of the outgoing shareholder to the pool dealer against payment of a purchase price of € 50,000 pursuant to § 7 para. 7 S. 1 ErbStG is subject to gift tax at the company.

2. Meaning of this design model

Such a design model makes it possible for the departing shareholder to receive back only his previously paid contribution in the event of departure. His involvement may, of course, have become much more valuable over time. However, this model means that this value does not have to be taken into account when the shareholder leaves. The shareholder is therefore in particular not involved in the hidden reserves and company values of the company. As a result, the GmbH does not have to pay the shareholder the actual value of the participation and thus prevents any liquidity difficulties of the company. In addition, the value of the share does not have to be determined. The value determination can regularly be very complex. This model therefore also serves simplification purposes. Another advantage of the model is that the entering person is nevertheless involved in the auditing firm under company law.

It is questionable whether § 7 para. 7 S. 1 ErbStG can be fulfilled at all by such a trust agreement. This requires that the other shareholder or the plaintiff is objectively enriched. This requires a shift in assets, which must relate to the asset substance. The enriched person must be able to freely and effectively dispose of the object of the donation. Many argue that this requirement of § 7 Abs. 7 S. 1 ErbStG is not even available. The trustee only holds the acquired share in trust for a period of time until the acquisition of a new shareholder. For this reason, the trustee cannot freely dispose of the share of the business for either a shareholder or the company.

Even if with regard to this argument the existence of the conditions of § 7 para. 7 S. 1 BGB is already controversial in such trust agreements, it is nevertheless to be determined whether someone as the purchaser of a gift within the meaning of § 7 Abs. 7 S. 1 BGB can apply.

3 Acquisition of the Company by Trust Agreement

The GmbH could be the acquirer of the retransferring shares and therefore liable for tax pursuant to § 20 I S. 1 ErbStG. In this direction, one can argue with the indication that the direct transfer of the share to the trustee takes place only to shorten the performance path. First and foremost, however, it should be about the relationship of the outgoing shareholder to the company.

Acquisition status is determined exclusively by civil law. It is irrelevant to whom the assets are attributable under economic consideration. There is no contractual basis for the transfer of the share from the shareholder to the company and from the company to the trustee. However, it was agreed in the trust agreement that the outgoing shareholder should transfer the shares directly to the trustee. He holds the shares for the remaining shareholders. In external relations, however, the trustee is considered the holder of full rights. The company cannot therefore be an acquirer, because the shares are not transferred to it at all and it did not become a party to the contract.

Finally, § 7 VII S. 2 ErbStG also stipulates that in the case of collection of the shares at nominal value, not the company, but the individual remaining shareholders should be enriched by the increase in the value of its shares. It seems questionable why a distinction should be made between § 7 VII S. 2 and S. 1 ErbStG.

It was expressly left open by the BFH whether the individual shareholders are objectively enriched and therefore according to § 7 para. 7 S. 1 ErbStG owe a tax. It can be assumed that the shareholders are a GbR. In this respect, the trustee would then hold the shares for GbR. If, however, the consistent approach under civil law is also based here, the allocation of the shares via § 7 para. 7 S. 1 ErbStG on the civil-law independence of the GbR.

5. exit from partnerships

Under consistent application of the civil law approach for the assessment of § 7 para. 7 S. 1 ErbStG, the case of growth in partnerships is to be assessed. § 7 Abs. 7 S. 1 ErbStG requires a transfer of shares. However, partnership law does not recognise the acquisition of own shares. The remaining shareholders are also unable to acquire further independent shares in the same partnership. Under civil law, increases only lead to changes in the distribution ratio if the share of the retired shareholder disappears at the same time. However, the transfer of assets in the event of the growth of a partnership does not constitute a transfer of shares within the meaning of § 7 para. 7 p. 1 ErbStG.