Stuttgart process

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The Stuttgart method is a method of estimating company value for the purposes of inheritance and gift tax . This is used to estimate the fair value of shares in unlisted corporations . The Stuttgart procedure was abolished on January 1, 2009 by the Inheritance Tax Reform Act; however, the method is still sometimes used between private contracting parties.

use cases

The Stuttgart procedure was used in accordance with Section 12 (2 ) ErbStG in conjunction with Section 11 (2) sentence 2 BewG if shares in a non-listed corporation are transferred by gift or inheritance and their value was not derived from sales of shares that were less than a year ago .

The procedure is regulated in R96 et seq. Of the inheritance tax guidelines (ErbStR 2003), but was not only used for inheritance tax , it was also chosen as the valuation method in contracts or GmbH statutes. Due to the decision of the Federal Court of Justice of September 24, 1984, it is only legally permissible in a modified form. Outside of tax law, the procedure is rarely used because it is fraught with significant shortcomings.

Newer development and alternative valuation methods

According to a ruling by the Federal Constitutional Court (BVerfG), the application of the Stuttgart procedure in the context of inheritance tax is not compatible with the Basic Law . Therefore, the Stuttgart procedure was abolished by the inheritance tax reform act on January 1, 2009.

Since January 1, 2009, the “valuation of shares in corporations” has been “primarily based on the common value”. In the case of corporations, the market value is used for valuation. If there was a sale to third parties within the last year, the valuation should be made at the sales price . In all other cases, a company valuation can in principle be carried out using various valuation methods. The methods include forward-looking evaluation methods (the earnings method according to the IDW S 1, the discounted cash flow method ), the yield value simplified method, the multiplier method or the intrinsic value method .

Classification in the assessment procedure

The Stuttgart method, the value of a company is the sum of net asset value (called asset) and income capitalization .

As an excess profit method, the procedure does not correspond to modern standards for the determination of the sales value of a company, in particular it does not correspond to the relevant IDW S1 standard (“Principles for conducting company valuations”) of the Institut der Wirtschaftsprüfer . It primarily serves fiscal purposes and is intended to ensure uniformity in taxation and thus legal peace through typical calculation, not an as adequate as possible valuation in individual cases.

calculation

The calculation takes place in three steps:

asset

First, R 98 ErbStR 2003 defines the asset value (V) of a corporation as the difference between the company's assets and liabilities, expressed as a percentage of the share capital. The valuation regulations of the Inheritance Tax and Gift Tax Act as well as the Valuation Act apply.

In principle, the asset is derived as the value of the business assets from the company's last balance sheet , with changes in value since the last balance sheet date and the profit or loss in the interim period having to be corrected. In deviation from the balance sheet approach, the real estate, z. B. Company property, to be set at the property value according to the Valuation Act. In the case of built-up properties, this is usually done through the needs assessment in accordance with Section 146 BewG.

Earnings percentage

R 99 ErbStR 2003 then defines the company's earnings percentage (E) as the weighted arithmetic mean of the imputed return on equity of the previous three financial years, whereby the profits of these three financial years are weighed once, twice or three times. This value is also expressed as a percentage of the nominal capital. If the operating result of the i-th previous year is called BE -i , the earnings percentage is calculated as

E = 100 (3 BE -1 + 2 BE -2 + BE -3 ) / (6 NK),

where NK denotes the nominal capital of the company. Extensive corrections must also be made here. Special discounts apply to

  • Companies that are not capital-intensive and almost completely depend on the personal activities of the shareholder-manager (the discounts are up to 30 percent),
  • very low returns.

Calculation of the common value

Based on the definitions of the numbers V and E, R 100 ErbStR 2003 finally describes the actual Stuttgart procedure. According to this, the common value (X) of a share in the corporation, expressed as a percentage of the nominal capital:

X = 0.68 (V + 5E).

This formula is based on the following economic concept:

The purchaser of all shares in a corporation not only pays the asset V, but also reimburses profits in the purchase price if the expected return on equity exceeds 9 percent. The tax authorities consider the value 9 percent to be the normal return on a business investment. Furthermore, the administration assumes that the buyer pays the profits for the next five years and expects that these profits correspond to the average profit calculated above for the previous three years. Based on these considerations, the common value according to the Stuttgart procedure is:

X = V + 5 (E-9X / 100).

The common value therefore corresponds to the sum of the asset and five times the difference between the earnings percentage and an interest rate on the equity capital X of 9 percent per year. The first formula for the mean value results from the second by solving for X and rounding off.

In the event of a loss according to R 99 ErbStR 2003, no negative value is used for the earnings percentage, but zero.

The value according to the Stuttgart method is therefore independent of the nominal capital of a company, since V, E and X are given in% of the nominal capital.

Note that the guidelines contain dozens of special provisions.

example

The nominal capital of an AG is 500,000 euros. The business assets derived from the tax balance sheet should be set at EUR 800,000. In the past three years, the AG has made a profit of 10,000 euros. Hence, V = 160 percent, E = 2 percent, and X = 115.6 percent. The value of all shares in the AG according to the Stuttgart process is then 578,000 euros.

Individual evidence

  1. ↑ BGH II ZR 256/83 of September 24, 1984, in Neue Juristische Wochenschrift, 1984, p. 192.
  2. ↑ Joachim Schultze-Osterlog, Journal for Corporate and Corporate Law. Volume 15, Issue 3, Pages 545-564, ISSN (Online) 1612-7048, ISSN (Print) 0340-2479
  3. ^ Resolution of the First Senate of November 7, 2006. BVerfG, accessed on May 1, 2019 .
  4. ^ Definition of the Stuttgart process , Birgitta Dennerlein. Gabler Economic Lexicon.
  5. ↑ Company valuation according to the new inheritance tax reform law , Sonntag & Partner 2010.

See also