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URL: http://www.deloitte-tax-news.de/german-tax-legal-news/bfh-rules-on-gift-taxconsequences-of-share-capital-increases-.html
09.01.2015
BFH rules on gift tax consequences
of share capital increases
The Federal Tax Court has held that an increase of a corporation’s
share capital is subject to gift tax if the premium to be paid by the
new shareholder does not reflect the fair market value of the
newly issued shares.
Germany’s Federal Tax Court (BFH) issued a decision on August 27, 2014 in which it
held that an increase of a corporation’s share capital is subject to gift tax if the premium
to be paid by the new shareholder does not reflect the fair market value (FMV) of the
newly issued shares (II R 43/12).
The case involved a GmbH that increased its share capital by issuing shares to a new
shareholder. The premium to be paid by the new shareholder—a newly founded
corporation— was considerably below the FMV of the new shares. The companies
involved in the transaction were ultimately wholly owned by related individuals.
The tax authorities assessed gift tax based on the difference between the FMV of the
newly issued shares and the amount the new shareholder had to pay and on the
relationship between the former shareholder (the donor) and the new shareholder (the
recipient) on the grounds that the share capital increase resulted in a value shift to the
benefit of the new shareholder.
The taxpayer appealed the assessment, arguing that value shifts between
corporations generally cannot be subject to gift tax if the value shifts are concurrently
qualified as deemed dividend distributions for income tax purposes.
The BFH disagreed and held that the value shift from the former shareholder to the
new shareholder resulting from the share capital increase is subject to gift tax.
The decision is an example of the ongoing focus of the German tax authorities on value
shifts among group companies for gift tax purposes. Taking into account amendments
to the Gift Tax Act that were enacted in 2011, careful structuring is necessary to
mitigate any gift tax consequences of corporate restructurings that include non-arm’s
length transactions.
Fundstelle
BFH, Urteil vom 27.08.2014 - II R 43/12
Contacts
Norbert Miethe | Düsseldorf
[email protected]
+49 21187723631
Dr. Leonid Korezkij | Düsseldorf
[email protected]
+49 21187723889
www.deloitte-tax-news.de
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