Shareholder debt financing
Of shareholder financing is called if a shareholder of a corporation is borrowing available, so at the same time as owners and as a lender ( creditor occurs) in relation to his corporation.
General and tax consequences
The capital requirement of a corporation can be covered by equity capital or by borrowed capital .
In a corporation, in contrast to a sole proprietorship, the partner (s) can provide their own company with equity and loans at the same time; this is called shareholder debt financing . In the case of a sole proprietorship, this is not possible under civil law, since the sole proprietor cannot conclude any contracts with himself . In a partnership , a partner can enter into contracts with his partnership that are effective under civil law; However, these contracts are de facto not recognized for tax purposes.
In the case of external financing of a corporation, the interest on the capital transfer for corporate income tax purposes is usually fully deductible, regardless of whether it is paid to a third party (e.g. a bank ) or to a partner. However, the assessment base for trade tax is only reduced by 75%. At the same time, the interest payments represent taxable investment income for the recipient. The external financing thus shifts the tax burden from the company to the partner.
As long as the company and partner are taxable in the same country, this has hardly any consequences for the state (apart from, for example, the saver's lump sum ), since the interest expenses at the company reduce the profit (only 75% for trade tax), but the partner is subject to income tax have to.
However, if the shareholders and the company are located in different countries, the shareholder debt financing can be used to move taxable income from one country (the high-tax country ) to another country (the low- tax country ) . The expenses are deducted in the high tax country and taxed lower than profit in another country.
Legal situation in Germany
Tax countermeasures and problems under European law
Section 8a of the KStG was introduced in Germany with the Location Security Act of 1993, which prohibited the deductibility of these interest expenses under certain conditions. Comparable regulations are called thin-capitalization-rules in international tax law , as they are intended to prevent under-capitalization . The § 8a KStG aF stipulated that interest expenses then may not be deducted if the German capital company from a foreign shareholder holding more than 25% of the shares, debt received and a certain ratio of debt to equity (most recently 1.5 : 1) has been exceeded.
In a judgment of December 12, 2002, the ECJ ruled that this provision is incompatible with the EC Treaty (case Lankhorst-Hohorst ) and therefore contrary to European law.
The regulation will be replaced by the interest barrier regulation as part of the 2008 corporate tax reform . For some companies with a different fiscal year than the calendar year, the new regulation has been in effect since July 1, 2007.
Changed version of § 8a KStG
With the Tax Reduction Act in 2004, the regulation on shareholder debt financing was therefore changed. Hardly any change in tax law in recent years has led to such great criticism in the specialist literature as the new version of § 8a KStG (see below).
According to the new version of § 8a KStG, interest on borrowed capital is not deductible (a hidden profit distribution ) if
- they represent remuneration for outside capital, which a corporation does not only have for the short term
- from a shareholder who at one point in time in the financial year held a significant interest, i.e. directly or indirectly holding more than 25% of the shares, or
- by a person closely related to a material shareholder, or
- from third parties (e.g. banks) with the option of recourse to shareholders who are significantly involved or persons closely related to them ( back-to-back financing )
- received, and
- the total remuneration is more than € 250,000 and if
- a remuneration that is not measured as a fraction of the loaned capital has been agreed (e.g. profit-related remuneration) or
- A remuneration based on a fraction of the borrowed capital has been agreed ("normal" interest payment), provided that the borrowed capital exceeds 1.5 times the proportionate equity capital (so-called "safe haven") at one point in the financial year.
The foreign shareholder criterion, which was objected to under European law, was abolished and the scope of the provision was extended to include domestic shareholders.
If Section 8a of the KStG is applied to remuneration for the provision of outside capital, there will be tax consequences both at the corporation level and on the part of the shareholder.
In the case of currency swaps, § 8a KStG - in accordance with the concept of a valuation unit - is only subject to the balance of the debt capital rate and the swap rate.
Tax consequences for the corporation
- The company's taxable income is increased; H. the assessment basis for corporate income tax increases by the previously deducted interest expenses, the assessment basis for trade tax increases by half of the deducted interest expenses.
- If the former EK02 is considered to have been used (see crediting procedure ), there may be a corporation tax increase in accordance with Section 38 KStG
- The corporation must withhold capital gains tax (25%, Section 43 (1) No. 1 EStG )
Tax consequences for the shareholder
- The hidden profit distribution is attributed to the shareholder as a participant regardless of the person receiving the remuneration, since only the shareholder is involved and related parties cannot receive any hidden profit distribution
- Expenses for the shareholder in connection with the debt remuneration (e.g. refinancing interest) are subject to the deduction prohibition of the partial income method ( Section 3c (2) EStG); if a corporation is a shareholder, a flat rate of 5% of the dividend / vGA is non-deductible business expenses ( Section 8b (5) KStG).
Tax consequences for related parties and third parties
If § 8a KStG is applied when outside capital is granted by related parties or by third parties , the tax consequences are extremely complex and in some cases still controversial today.
Criticism of the new version
Hardly any other tax regulation has produced a flood of specialist literature in such a short period of time as the new version of Section 8a of the KStG. The core of the criticism is that in the endeavor to make the provision viable under European law, a previous abuse provision (prevention of profit extraction through excessive debt financing) has become a system-supporting provision for the non-deductibility of interest expenses. The area of application of the regulation is very unclear, so that the Federal Ministry of Finance quickly issued an extensive application letter that wanted to resolve the most serious problems of interpretation.
Originally, there was also criticism of the fact that with this provision everyday processes were subjected to disadvantageous tax treatment. It is customary that medium-sized GmbHs only get outside capital from their bank if the shareholder guarantees for it . However, according to the wording of § 8a KStG, this would fall under the scope of § 8a KStG ("third party with recourse"), so that the GmbH can no longer claim the interest expenses as a tax deduction and under certain circumstances would have had to pay taxes, although they did have one positive EBIT , but no profit , so that she records a loss after taxes. The BMF letter tries to restrict the scope here, even if it is disputed whether this is compatible with the wording of § 8a KStG.
literature
- Bernd Erle (Ed.): Heidelberg Commentary on Shareholder External Financing - Commentary on §§ 8a, 8b KStG from 2004 and at the same time supplementary volume to the Heidelberg Commentary on Corporate Income Tax Act. CF Müller, Heidelberg 2004, ISBN 3-8114-5901-5 .
- Nina Maier: The regulations on shareholder external financing in an international comparison. Dissertation, University of Würzburg 2006 ( full text ).
- Andreas Messerer: Corporate tax reform 2008. Compact - fast - reliable. All important legal changes. (Lexicon on corporate tax reform, legal changes in context, tables, overviews, graphics). Boorberg, Stuttgart a. a. 2007, ISBN 978-3-415-03956-8 .
- Siegfried Widmann, Rolf Füger, Norbert Rieger: Shareholder external financing. Stollfuß, Bonn 2004, ISBN 3-08-215301-1 .
- Claudia E. Wolter: Shareholder financing. Hidden deposits, hidden share capital, third-party contributions. Duncker and Humblot, Berlin 1997, ISBN 3-428-08843-3 (also dissertation, FU Berlin 1995).
Individual evidence
