date | theme

10. June 2021 | Zebragesellschaft: Requalification of the income of shareholders of a partnership (this contribution)

25. May 2021 | Transfer of rented property to partnership – What needs to be considered?

22. April 2020 | Option model for corporate tax for OHG & KG – new law

24. November 2020 | Advantages of partnerships in real estate transfer tax

28. October 2020 | Sell partnership abroad tax-free by conversion

You are a shareholder of a partnership. This partnership only uses its assets by renting out various properties. Consequently, the assets are invested in society for regular long-term conservation and fruit production. The reallocation of assets, on the other hand, takes a back seat. Thus, the partnership is only active in asset management (§ 14 sentence 3 AO). It follows that the partnership generates income at company level within the meaning of § 21 (1) no. 1 EStG. Therefore, it achieves so-called surplus income, which is not subject to trade tax. Nevertheless, the profit shares that you earn as a shareholder from the company can be requalified into commercial income, with the result that these profits are subject to business tax. The other shareholders, on the other hand, can continue to earn income within the meaning of § 21 (1) no. 1 EStG, so that their income is not subject to business tax. In this case, one speaks of a so-called zebra society. We explain in which cases the requalification takes place and why.

partnership with 15% KSt: better than VV-GmbH?

We clarify how you can save real estate transfer tax by transferring a property to a partnership.

1st asset management partnership

The asset management partnership is a company that exclusively uses capital assets or other assets. Often these assets are real estate. Asset management is assumed if the assets are invested for a regular longer-term maintenance and fruiting and reallocation of the assets takes a back seat (§ 14 sentence 3 AO).

Therefore, in this case the partnership itself generates income within the meaning of § 21 (1) no. 1 EStG, i.e. income from rental and lease. The reason for this is that the partnership can only generate commercial income within the meaning of § 15(2) EStG if it does not merely carry out asset management. For this reason, the attribution of the income of an asset management partnership to the shareholders does not take place via § 15 (1) no. 2 sentence 1 half sentence 1 EStG, but rather in accordance with the general attribution norm of § 39 (2) no. 2 AO. This must be justified by the fact that the shareholders cannot be regarded as co-entrepreneurs within the meaning of § 15 (1) no. 2 sentence 1 half sentence 1 EStG due to the lack of a commercial partnership. Nevertheless, in such a case, a so-called zebra company may be present.

2. The Zebra Company

First of all, it is necessary to clarify what a zebra society is and how it is founded.

2.1. Definition of zebra society?

A zebra company exists if the profit shares of the shareholders of a partnership from that company are attributable to different types of income. A zebra company therefore exists if individual shareholders generate income within the meaning of § 21 (1) no. 1 EStG, i.e. income from renting and leasing, while other shareholders generate commercial income within the meaning of § 15 (2) EStG. If you now represent the individual types of income black and white, a zebra pattern emerges. This is why society is called zebra society.

The creation of a zebra company therefore requires that the shareholders receive income of different types of income. By allocating the income of the company to the individual shareholders in accordance with § 39 (2) no. 2 AO, the shareholders first achieve the type of income that is also achieved at the level of the company. In the present case, the shareholders thus obtain income from renting and leasing within the meaning of § 21 (1) no. 1 EStG. Therefore, the creation of a zebra company requires a requalification of income at shareholder level.

2.2.1 Participation in operating assets

Revenue is to be requalified if the shareholder holds the participation in his business assets as a sole proprietor. It is sufficient if he holds the participation in his special business assets of another partnership. The participation is always attributable to the necessary operating assets of the shareholder if it is intended to promote decisively his operational activities. As a result, this shareholder generates commercial income. The others, on the other hand, continue to earn rental and lease income.

2.2.2 Participation of a limited liability company

If a corporation participates in the partnership, the profit share pursuant to § 8(2) KStG is commercial income of the corporation, since it always generates commercial income. Consequently, income at the level of the shareholders must also be requalified if a limited company participates in the asset management partnership. In this case, only the corporation generates commercial income. The other shareholders can continue to earn income from renting and leasing.

A distinction must be made, however, at GmbH & Co. KG. A typical vermögensverwaltende GmbH & Co. KG, in which the GmbH acts as the sole personally liable partner, is generally regarded as having a commercial character within the meaning of § 15 (3) no. 2 EStG. This partnership therefore already generates commercial income at company level. Consequently, if the conditions are met, the shareholders can also be co-entrepreneurs within the meaning of § 15 (1) no. 2 EStG. Thus, the allocation of income to the shareholders takes place via § 15 (1) no. 2 sentence 1 EStG.

3. zebra society and its legal consequences

The consequence of the requalification of the shareholder’s profit shares into those from § 15 (1) no. 1 EStG is therefore that they are subject to business tax. Consequently, the business income increases or decreases by the shareholding profit or loss. However, you can in principle count the trade tax on the income tax according to § 35 EStG.

Justification of the legal consequences of a zebra company

The recognition of a zebra company and the requalification of income has, above all, the reason to equate the participation of a partnership that leases real estate in the business assets to that of the sole proprietor of the property. If the shareholder did not bring the rented property into the “coat” of the partnership, he would be treated as a sole proprietor. Both must therefore be treated equally and burdened with business tax.