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04. May 2021 | Skillfully use conservation needs assessment (this article)

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§ 28a ErbStG regulates the protection requirements test. This makes it possible that, under certain conditions, the inheritance tax or gift tax attributable to an acquisition transaction can be waived. It is considered for large acquisition. § 13a(1) ErbStG exempts 85 % of the beneficiary company assets within the meaning of § 13b(2) ErbStG from taxation if the acquisition of the beneficiary assets exceeds the threshold of 26 million. does not exceed the euro. This protection is called control protection.

If the beneficiary assets exceed the amount of 26 million after deduction of the advance premium and the sliding deduction. Euro, so is a so-called large acquisition. In this case, the control protection is not applicable. Nevertheless, the acquirer has the right to vote. On the one hand, he can make use of the melting model according to § 13c ErbStG. Alternatively, it is possible for him to apply for the protection requirements test according to § 28a ErbStG. If the acquisition exceeds 90 million Euro, the relief needs test is the only way to obtain a tax advantage for the company assets. What this protection requirement test is and how extremely high control loads can be avoided will be clarified below.

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1st conservation needs test

In accordance with § 28a ErbStG, the grace requirements test means that the inheritance tax attributable to the beneficiary company acquisition can be waived. The condition for this is that the acquirer cannot provide the tax from his own available assets. Therefore, the aim of the conservation needs test is on the one hand to protect entrepreneurial assets. On the other hand, however, the large acquisition should be taxed if it appears reasonable with regard to the assets to be used.

The cause of this norm is a judgment of the BVerfG. Therefore, it is a free large acquisition, i.e. an acquisition of beneficiary assets worth more than 26 million. Euro, largely or completely can be exempted from tax, fulfilling further requirements necessary. For this reason, a favourable treatment should only be possible in such a transition if the personal circumstances of the large purchaser dictate this. On the other hand, the protection requirement test is not limited upwards. This means that even with a beneficiary assets with a value of more than 90 million. in the euro, the conservation needs test can be used.

2nd conservation needs test mechanism

In essence, § 28a ErbStG assumes that the acquirer must use half of the value of his non-beneficiary assets for the tax payment. However, the remaining tax in excess of this amount may be waived.

The following example:

Heir A inherits from his mother a company worth 50 million. Euro. It is assumed that only beneficiary assets are present. The available assets of the A amount to 20 million. Euro.

At a tax rate of 30 %, the tax on the beneficiary acquisition is 15 million. Euro. In the spare needs test, A now has to pay half of his available assets immediately. He therefore pays 10 million. Euro. The other 5 million The euro will be waived.

Prerequisite of the relief needs test is that the acquirer is not able to pay the tax with his available assets. In addition, he must have applied for the protection requirements test.

3.1. Available assets

The remission is granted insofar as the acquirer cannot have available assets within the meaning of § 28a paragraph 2 ErbStG, from which he could pay the tax. According to § 28a(2) ErbStG, the available assets comprise 50 % of the non-beneficiary assets acquired with the transfer of assets. In addition, the available assets also include 50 % of the assets already belonging to the acquirer at the time of the tax creation, which in the case of a gift or inheritance would not belong to the beneficiary assets within the meaning of § 13b(2) ErbStG. The available assets therefore include the private assets of the acquirer.

In addition, additional non-beneficial acquisitions by gift or death that took place within ten years are also taken into account. It is irrelevant from whom the property is acquired. Available assets therefore include, for example, new financial resources or new administrative assets of the transferred business or of a business already belonging to the acquirer, the money or securities assets acquired or already existing, but also the existing private detached house, private cars or jewellery. If the acquirer receives further unfavourable assets within ten years, it may therefore happen that he must also raise all of these assets for the tax of the previous acquisitions. It is important to note that the tax on the subsequent acquisition should not be taken into account when calculating the available assets. It therefore does not reduce the available assets.

When calculating available assets, debts and burdens are deducted. However, the tax on the acquisition is not deductible from the available assets. It can also be seen that the request for protection needs test is void if there is too much available assets. In this case, the full tax must be paid.

3.2. Application for conservation needs test

It is also necessary that the purchaser submits the request for an emergency needs test. It may be submitted until the date of the limitation period. This means regularly up to five years after the maturity of the tax liability. The application must be submitted in writing by the acquirer to the tax office responsible for the inheritance or gift tax or declared in writing.

3.3 Large acquisition

The spare requirements test can still only be applied for if there is a large acquisition. A so-called large acquisition exists if assets of more than 26 million. the euro is transferred directly. It is before testing the threshold of 26 million. Euro first to take into account the advance discount according to § 13a paragraph 9 ErbStG for family businesses. Only if, despite the advance discount, assets of more than 26 million. Euro, the conservation needs test may be applied.

In addition, however, so-called stepped large acquisitions may also be included. For this purpose, the individual previous acquisitions must be within the ten-year limit of § 13a (1) sentence 2 ff ErbStG. If this is the case, the individual acquisitions are added together. As a result, the exemption limit of 26 million can be reduced. the euro is exceeded. In this case, § 28a ErbStG applies retroactively. Therefore, donations already completed and recognized as beneficiaries are included. As a result, they are retroactively subject to inheritance and gift tax.

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4th Disadvantages of the conservation requirements test

In the context of the asset requirements test, certain disadvantages arise, in particular in connection with its concept.

4.1 Mechanism of the conservation needs test

Since the tax is remitted only at the request of the taxable person, it is first set at full acquisition. There comes an amount of 26 million. Euro is exceeded, always applying the maximum tax rate. This leads to the tax being set at the highest rate for any unfavourable property acquired. In the other methods, in particular in the melting method, the beneficiary property does not flow into the tax base, so that the tax rate may be lower.

4.2. Application for conservation needs test

An application for a grace requirement test is only possible if one has not previously applied for the melting method for the corresponding assets (§ 13c paragraph 2 p. 6 ErbStG). The application for the melting method is irrevocable. Therefore, a change from the melting method to the protection requirement test is not possible. In the case of a prior request for a spare requirements test, a change is possible due to the lack of a corresponding legal regulation. It is therefore possible to revoke the request for a grace test and then apply for the melting method. The only prerequisite for this is that the corresponding deadlines are respected.

5th succession planning for conservation needs testing

In order for the spare requirements test to be used effectively, it is crucial under the considerations listed that the obligation of the acquirer to use available assets within the meaning of § 28a paragraph 2 ErbStG is avoided or minimized. For this it is important that the succession is sufficiently planned. In addition, certain design models come into consideration, which are illustrated below.

5.1 Reduce unfavourable assets at company level

As just described, the unfavourable acquired property is considered to be available property, which then has to be paid 50% to pay the tax. For this reason, at company level, it should first be ensured that the unfavourable assets are reduced. The non-beneficiary assets include administrative assets (§ 13b (4) ErbStG) and young financial resources (§ 13b (4) (5) second sentence ErbStG) or young administrative assets (§ 13b (7) second sentence ErbStG). Especially young financial resources or young administrative assets should be avoided due to lack of accountability and lack of allowances or buffers. ‘Young’ means those assets which were attributable to the holding for less than two years at the time the tax was imposed.

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5.2 Enterprise Value

For “normal” financial resources and “normal” administrative assets, however, the financial release amount of § 13b (4) no. 5 sentence 1 ErbStG and the goodwill buffer can be used in principle so that they are regarded as beneficiary and therefore no longer belong to the available assets. According to § 13b (4) no. 5 sentence 1 ErbStG, the financial release is dependent on the value of the company. In addition, the harmless administrative assets within the meaning of § 13b(7) ErbStG (so-called goodwill buffer) have a higher amount, the greater the company value. Therefore, a high company value can basically lead to a reduction in the available assets. Among other things, the high capitalization rate of 13.75 (§ 203 BewG), which applies in the simplified income value procedure, helps to achieve a higher company value. This serves to measure unquoted shares in corporations and operating assets. This valuation result thus determined is then relevant within the framework of the financial release and the goodwill buffer.

Furthermore, it can be checked whether another valuation method leads to a higher company value. For example, the IDW S1 can also be used instead of the simplified yield value method.

But it can also be attractive to choose a valuation method that reduces the company value. In the case of company succession, a lower company value would then pass. If the value is less than 26 million. Euro does not take place a large acquisition, so that the rule protection can also apply.

5.3. Preventing Available Assets on the Acquisition Side

In addition, the acquirer should have little available assets. Available assets on the part of the acquirer can be prevented, for example, by the acquirer transferring the corresponding assets to young family members. The unfavourable property of the acquirer may also be transferred to subsequent generations or the spouse by way of a property swing.

5.4. Family Foundations

If the acquirer has a lot of available assets, it is also conceivable that he transfers the assets to a family foundation that has no or only very little assets. This avoids the existence of available assets on the part of the acquirer, which must then be observed in the context of the protection needs test. This design is possible, since the benefits of §§ 13a, 13b in conjunction with § 28a ErbStG are also applicable to foundations in the transfer.

Furthermore, it should be noted that half of the acquired unfavourable property before the deduction of the inheritance or gift tax would in principle have to be used within the framework of the relief needs test. This could be prevented by the company transferring the assets fragmented. The part of the unfavourable assets could then be transferred to a family foundation, for example. Ideally, the acquirer then no longer has any available assets. In this case, only the “normal” taxation of the transferred private assets would remain.

5.5. Prevent re-taxation

In addition, the available assets acquired in the future within the ten-year period must also be observed and, as described above, can lead to retroactive taxation of earlier gift or inheritance transactions. Therefore, the acquirer should not receive any available assets within the 10-year period. You can change the will accordingly. In this context, it may be appropriate to use a family foundation again as a future acquirer.

5.6. After the transfer

After a major acquisition, it must be monitored when using the grace requirements test that the holding periods and the payroll regulations are adhered to. This also applies in the context of restructuring. In order to avoid negative tax effects, future asset inflows must be prevented or designed.