Procedural questions regarding the contribution of co-entrepreneurial shares pursuant to § 20 UmwstG

Introduction

The Munich tax court (judgment of 24.7.2024 - 1 K 524/19) dealt (among other things) with procedural issues in connection with the contribution of co-entrepreneurial shares. It is noteworthy that para. 20.22 UmwStE is not explicitly rejected in this decision.

In addition to the issues mentioned in the ruling, there are other areas in which there is still legal uncertainty. For example, we wonder what legal protection is appropriate in the case of contributions in the event of a dispute (also) regarding the determination of the trade tax assessment amount. It is also unclear whether the binding effect of the profit assessment notice also applies if the co-entrepreneurship grows as a result of the contribution.

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Facts of the case

A foundation initially held a co-entrepreneur share in a KG. This was then transferred to a GmbH in return for the granting of company rights, with tax effect as at 31.12.2005. This transfer took place with a continuation of the book value for tax purposes, but with the recognition of market values in the commercial balance sheet. Shortly afterwards, the acquiring GmbH dissolved the capital reserves created in this way in the amount of millions.

The KG was initially assessed in accordance with the declaration. During a tax audit, the tax authorities came to the conclusion that the reversal of the capital reserve led to the applicability of Section 20 (2) sentence 5 UmwStG (old version). As a result, the tax valuation was adjusted in 2014 to the other consideration granted thereafter. This was done by breaking through the statute of limitations and the statute of limitations with regard to the 2005 assessment notice for the KG by invoking an authority to amend due to new facts (sections 181 (1), (5) and 173 (1) no. 1 AO).

The plaintiff contested this treatment with numerous arguments. Of particular importance in practice is the question of whether the book value approach at the level of the GmbH is materially binding for the treatment in the assessment procedure of the KG. The plaintiff is of the opinion that this valuation is to be determined in the profit assessment procedure and is binding for the KSt assessment procedure due to § 182 I AO. At issue was the notice of amendment in the 2005 profit assessment procedure, which the plaintiff sought to have set aside.‍

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Judgment of FG

The tax court ruled in favor of the plaintiff for various reasons. Two aspects are particularly important in practice:

- The binding effect of § 20 para. 4 sentence 1 UmwStG old version (§ 20 para. 3 sentence 1 UmwStG new version) is based on the profit assessment notice in the case of the contribution of co-entrepreneurial shares.

- The valuation also has a binding effect under substantive law if the authority asserts that an option pursuant to § 20 para. 2 UmwStG does not exist or does not exist in this form.

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Assessment

1. the view of the Munich tax court contradicts para. 20.22 UmwStE to the current § 20 para. 3 sentence 1 UmwStG. To be on the safe side, apply for a book or interim valuation in the assessment procedure and additionally in the corporation tax assessment procedure.

2. If the transferred assets do not represent a privileged asset group, you must seek legal protection in the procedure in which the contribution profit is determined.‍