Entries by Ester Hahn

PURCHASE PRICE WITH EARN-OUT – ADVANTAGEOUS TAXATION OR NOT?

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In its ruling dated 9 November 2023 (case no. IV R 9/21), the BFH decided on the taxation of so-called earn-out payments that these purchase price components are (only) taxable as subsequent business income at the time of receipt. This raises the further question of whether the agreement of earn-out payments as a whole jeopardizes the advantageous taxation of sale gains in accordance with § 34 para. 3 German Income Tax Act (EStG).

OBLIGATION OF DISCLOSURE AND DUE DILIGENCE IN THE FOCUS OF THE BGH

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A so-called due diligence review is probably indispensable in connection with company acquisitions and sales and has long since established itself as the market standard in the run-up to M&A transactions. However, due diligence reviews are also a regular occurrence in other areas of law – including real estate transactions. A recent decision by the BGH deals with the seller’s obligation to provide information if he offers a data room to carry out a due diligence review as part of a real estate transaction. Conclusions for M&A transactions could also be derived from this decision.

SO-CALLED BLOCK ACQUISITION OF A STAKE OF AT LEAST 10 % FROM SEVERAL SELLERS

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In its ruling dated 6 September 2023, case reference: I R 16/21, the Federal Fiscal Court (BFH) decided that the participation threshold of 10 % under § 8b para. 4 sentence 6 German Corporation Tax Act (KStG) can also be reached if several sellers are involved in the acquisition transaction. Accordingly, it depends on the existence of an economically uniform acquisition transaction.

GOOD THINGS COME TO THOSE WHO WAIT? – BVERFG GIVES (PARTIAL) GREEN LIGHT FOR INCOME TAX-NEUTRAL TRANSFER OF ASSETS BETWEEN SISTER PARTNERSHIPS WITH IDENTICAL SHAREHOLDINGS

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On 12 January 2024, the Federal Constitutional Court (BVerfG) published its long-awaited decision of 28 November 2023 (case no. 2 BvL 8/13), in which it declared the provision of § 6 para. 5 sentence 3 EStG (German Income Tax Act) to be partially incompatible with the general principle of equality under Art. 3 para. 1 of the German Constitutional Law, i.e. to the extent that a transfer of assets between sister partnerships with identical shareholdings at book value is excluded. The decision provides a certain degree of legal certainty in practice, but does not answer all open questions regarding the transfer of book values between partnerships with identical shareholdings.

FUTURE FINANCING ACT – NEW TAX BENEFITS FOR EMPLOYEE PARTICIPATION PROGRAMS

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From 1 January 2024, employee participation programs may fall more frequently under the benefits of § 19a German Fiscal Code (Einkommensteuergesetz – EStG) (special provision for income from employment in the case of asset participations -Sondervorschrift für Einkünfte aus nichtselbständiger Arbeit bei Vermögensbeteiligungen) and therefore benefit from the associated tax advantages.

ACT ON THE MODERNIZATION OF PARTNERSHIP LAW (MOPEG) – FUTURE CHANGES TO PARTNERSHIPS UNDER CIVIL LAW (GBR)

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With the Act on the Modernization of Partnership Law (Gesetz zur Modernisierung des Personengesellschaftsrechts – MoPeG), a comprehensive reform of German partnership law will come into force on 1 January 2024. This also entails a large number of legal changes for the basic form of partnerships (Personengesellschaften), the partnership under civil law (Gesellschaft bürgerlichen Rechts – GbR). This article is intended to summarize the main changes of the MoPeG for the GbR. In particular, it will be shown which changes of the MoPeG (i) merely codify – already applicable – established case law and which, on the other hand, (ii) actually constitute material changes to the previous legal situation. In particular, so-called external GbRs (Außen-GbR), which participate in legal transactions themselves, will have to take a number of changes into account in future. For example, there is the possibility of voluntary registration of the GbR in a company register (Gesellschaftsregister), whereby this can also become a “registration obligation through the back door” in practice due to legally standardized pre-registration requirements.