Entries by Ester Hahn

LOSS OF SHAREHOLDER LOANS – TAX-RELEVANT OR NOT?

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The tax recognition of losses from shareholder loans has significantly changed over the past few years. While the Federal Court of Finance [Bundesfinanzhof – BFH] initially assumed that such losses could be partially deducted as subsequent acquisition costs if certain conditions were met, it allowed full deduction from capital income in 2017 with two judgments. The legislator now wants to change this. However, it is good for the taxpayer that the BFH has given consent to some legal structurings surrounding shareholder loans.

BASIC PRINCIPLES OF DEFECTIVE EMPLOYMENT RELATIONSHIP APPLICABLE TO AN EMPLOYMENT CONTRACT OF A MANAGING DIRECTOR OF A GMBH

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Our last newsletter (edition 2019|Q3) had already addressed two Supreme Court decisions concerning the employment of an externally hired managing director of a limited liability company [Gesellschaft mit beschränkter Haftung – GmbH]. This article supplements the thematic complex, because in its ruling of 20 August 2019 (case no. II ZR 121/16), the Federal Court of Justice [Bundesgerichtshof – BGH] decided what consequences would arise if an employment contract with a managing director of a GmbH was not effectively concluded.

USEFUL REGULATIONS IN AN ENTREPRENEUR’S LAST WILL

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Securing the preservation of the company, maintaining family peace and protecting the economic hedging of all family members – in order to achieve these goals, an entrepreneur should deal with succession plans at an early stage and should not rely on the statutory provisions on succession. When drafting the articles of association and then also when drafting the testamentary disposition, there are various structuring possibilities, some of which are explained below.

POOL AGREEMENTS – HOW TO OVERCOME THE INHERITANCE TAX HURDLE OF 25 %!

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Shares in corporations, except shares in non-member States, are granted tax concessions for inheritance and gift tax purposes if the testator or the donor directly held more than 25 % of the nominal capital of a company. The threshold of 25 % also applies to the question of whether so-called administrative assets are involved. Pool agreements make it possible to achieve the required quota. The German Federal Fiscal Court [BFH] clarified what needs to be considered in this respect.

AN (EXTERNALLY HIRED) MANAGING DIRECTOR OF A GMBH ACTING AS AN EMPLOYEE?

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Two current decisions are addressing the question, whether an (externally hired) managing director of a limited liability company can be regarded as employee. While being denied by the Federal Labor Court in its decision of 21 January 2019 (file no. 9 AZB 23/18), the Federal Court of Justice grants an externally hired managing director the status of an employee (decision of 26 March 2019, file no. II ZR 244/17). Nonetheless, the two decisions are not contradictory.

LATEST NEWS ON EXIT TAXATION: IMMEDIATE TAXATION OF BUSINESS SHARES UPON TRANSFER OF DOMICILE TO SWITZERLAND DISPROPORTIONATE ACCORDING TO ECJ

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In spring 2019, the European Court of Justice (ECJ) decided that in certain constellations a deferral of payment of the tax payable in the event of a transfer of domicile (section 6 German Foreign Transaction Tax Act) must also be granted when relocating to Switzerland, i.e. also in relation to a third country. This results from the Agreement on the Free Movement of Persons, which was concluded between the member states of the EU and Switzerland in 1999.

PROTECTING SECRETS WHILE REMAINING INNOVATIVE – HOW THE GERMAN TRADE SECRETS ACT INFLUENCES A COMPANY’S EVERYDAY LIFE

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The German Trade Secrets Act has come into effect on April 26, 2019. It was intended as a facilitation of law enforcement in Europe, but now it leads to vast bureaucracy. Companies need to figure out technical and organizational measures to protect their own data. In this article, we will illuminate what this means for transactions and how to deal with the biggest “risk factor” – employees.