Sale of business

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Under German tax law, a sale of a business according to Section 16 of the Income Tax Act (EStG) refers to any sale of civil law or (at least) economic ownership of a business or part of a business to another (tax) legal entity . If an entire business or a part of it is sold, the profits that are made are part of the income from business in accordance with Section 15 of the Income Tax Act. (Section 16 (1) EStG). The sale of the business uncovered the previously untaxed hidden reserves (unrealized profits).

Definition

A company sale according to § 16 Abs. 1 EStG exists if a trader:

  • All essential operating principles of his company
  • in a single process
  • paid
  • sold to an acquirer with the result,
  • that this continues the operational entity (unchanged)
  • and the previous business owner ceases commercial activity in his previous business.

There is no business sale in the following cases:

  • Donation ,
  • Transfer of business due to inheritance ,
  • Transfer of business in fulfillment of legacies ,
  • the entrepreneur withholds essential business fundamentals in the event of the sale of his remaining business or part of the business and uses this for another business activity.

If the essential assets belonging to the company are sold to various buyers or partially transferred to private assets, one speaks of an operational closure . The tax consequences are identical.

Determination of the capital gain (Section 16 (2) EStG)

The capital gain is determined as follows: 

   Veräußerungspreis
   + gemeine Werte der in das Privatvermögen übernommenen Wirtschaftsgüter
   - Veräußerungskosten
   - Buchwerte des Betriebsvermögens
   = Veräußerungsgewinn

Exemption according to Section 16 (4) EStG

The tax exemption according to Section 16 (4) EStG is 45,000 euros and is deducted directly from the capital gain. The following requirements must be met:

  • The taxpayer has reached the age of 55 or is permanently disabled
  • The allowance can only be used once in a lifetime
  • The tax exemption can only be granted upon application
  • The regulations also apply to the sale of part of a business and co-entrepreneurial shares

Reduce the tax exemption if the limit is exceeded

The tax exemption is granted in full, provided that the capital gain does not exceed EUR 136,000. The tax exemption is reduced by the amount by which the capital gain exceeds EUR 136,000. This means that the tax exemption is not applicable if the capital gain is more than EUR 181,000.

Example:
Capital gain 140,000.-
Exemption 45,000.-
./. Reduction of
capital gains 140,000.-
./. Limit amount 136,000.- Reduction amount
4,000.-
Remaining exemption 41,000.- (45,000./. 4,000)
Taxable capital gain 99,000.- (140,000./ 41,000)

Tax relief according to Section 34 (2) EStG

Income according to Section 16 (1) EStG generally represents extraordinary income according to Section 34 (2) EStG. For extraordinary income, either the one-fifth rule or the reduced tax rate can be applied.

Fifth regulation according to Section 34 (1) EStG

In order to apply the rule of one fifth, the taxpayer submits an application for application of Section 34 (1) EStG, which can only be submitted uniformly for all extraordinary income generated in the assessment period.
4 steps are required for the calculation:

  1. Calculation of the collectively agreed income tax on the taxable income
  2. Calculation of the collectively agreed income tax on the taxable income plus 1/5 of the extraordinary income
  3. Fivefold the difference between 1st and 2nd
  4. Addition of the amount from 3rd to the amount from 1st

Example:
The single P sells his sole proprietorship on June 30, 2014 with a capital gain (according to the tax exemption within the meaning of Section 16 (4) EStG) within the meaning of H. v. 160,000 euros. His other income in 2014 was 40,000 euros.
Income tax is determined as follows:

  1. Calculation of the collectively agreed income tax on the “remaining taxable income” (40,000 euros, 2014 tariff): 8,940 euros
  2. Calculation of the collectively agreed income tax on the "remaining ZVE" plus 1/5 of the extraordinary income (72,000 euros, 2014 tariff): 22,001 euros
  3. Five times the difference between 1. and 2. 65,305 euros
  4. Total collectively agreed income 74,245 euros

Without the benefit under Section 34 (1) of the EStG, a collectively agreed income tax in the amount of EUR 200,000 would have been applicable. H. v. 75,761 euros (2014 tariff). The progression advantage is therefore 1516 euros

Reduced tax rate in accordance with Section 34 (3) EStG

The reduced tax rate only applies to capital gains in accordance with Section 34 (2) No. 1 EStG up to an amount of 5 million euros. The following requirements must be met:

  • The taxpayer must apply for the reduced tax rate
  • The taxpayer has reached the age of 55 at the time of the sale or is permanently disabled
  • The privilege has never been granted before

4 steps are required for the calculation:

  1. Calculation of the average collectively agreed income tax on total taxable income
  2. Determination of the 56% rate on this average collectively agreed income tax (at least 14% = input tax rate)
  3. Application of the 56% rate from 2. to extraordinary income.
  4. Addition of the income tax from 3. to the regular income tax of the regular income

Example:
The single P sells his sole proprietorship on June 30, 2014 with a capital gain (according to the tax exemption within the meaning of Section 16 (4) EStG) within the meaning of H. v. 160,000 euros. His other income in 2014 was 40,000 euros.
Income tax is determined as follows:

  1. Calculation of the average collectively agreed income tax on the entire ZVE (75,761 euros / 200,000 euros, 2014 tariff): 37.8805%
  2. Of which 56% ("reduced tax rate") 21.21308%
  3. Application of the reduced tax rate on extraordinary income (160,000 euros) 33,940 euros
  4. Total collectively agreed income (income tax from 3rd income and income tax regular income

40,000. x 37.8805% = 15,152 euros) 49,092 euros

Without the benefit under Section 34 (3) EStG, a collectively agreed income tax in the amount of EUR 200,000 would have been applicable. H. v. 75,761 euros (tariff 2014). The progression advantage is thus 26,668 euros.

literature

  • Zenthofer / Schulze on Wiesche income tax 2007 pp. 528, 530, 615, 616
  • Kirchhof EStG Compact Commentary 2008 pp. 924–925

Web links

Individual evidence

  1. ↑ BFH, judgment of September 22, 1992, Az .: VIII R 7/90 = BFHE 170, 29
  2. ↑ Ulrich Schallmoser: EStG § 16 sale of the company . In: Walter Blümich (Ed.): EStG . 125th edition. Franz Vahlen, Munich 2015, Rn. 20th