Going forward, sales of shares in corporations will generally include all shareholdings below 1%.
What is changing
Under current law, in cases of contributions in kind, only shares below 1% that arose from a contribution in kind after 12 December 2006 qualify as shares in corporations.
Since the previous version of § 21 UmwStG will no longer be applicable, it is necessary to also include old contribution-related shares arising from a contribution in kind within the scope of § 17 Abs. 6 EStG.
As a result, all shareholdings below 1% that arose in the course of a (tax-privileged) share exchange or a (tax-privileged) contribution in kind under the provisions of the UmwStG will – regardless of the date of contribution – generally fall within the scope of § 17 Abs. 6 EStG.
Entry into force
This applies from 1 January 2025.
Contribution of business units to a corporation
In cases involving the contribution of business units to a corporation, the previous statutory rule had to be amended in response to the case law of the Bundesfinanzhof (BFH).
Background
In the past, it was the view of the tax authorities that the contributed business assets must not become negative, even in the case of withdrawals within the tax retroactive period.
The Bundesfinanzhof (BFH) takes a different view. It permits negative acquisition costs in such cases.
What is changing
In the view of the legislator, however, avoiding negative acquisition costs is consistent with the intent of the statute.
The statutory amendment is therefore intended to clarify that, in line with the existing administrative view, withdrawals and contributions within the retroactive period must be taken into account when determining the contributed business assets.
As a result, a book value carryover of the contributed business assets is not possible if, taking into account withdrawals and contributions during the retroactive period, negative acquisition costs would result. To that extent, the book values of the contributed assets must be stepped up.
Entry into force
Applies for the first time to contributions where, in cases of universal succession, the conversion resolution was passed after 31 December 2023, or, in other cases, the contribution agreement was concluded after 31 December 2023.
Frequently asked questions
Frequently asked questions
Which shareholdings below 1% fall under Section 17 (6) EStG from 2025 onwards?
As of 1 January 2025, all shareholdings below 1% that arose through a tax-privileged share exchange or a tax-privileged contribution in kind under the provisions of the UmwStG generally fall within the scope of Section 17 (6) EStG. This applies regardless of the date of contribution and therefore also includes legacy contribution-acquired shares (alt-einbringungsgeborene Anteile) that arose before 13 December 2006.
Why are old contribution-acquired shares included in § 17 Abs. 6 EStG?
Since the previous version of § 21 UmwStG will no longer apply in the future, old contribution-acquired shares created through a contribution in kind must also be included in the taxation regime of § 17 Abs. 6 EStG. This ensures that such shares remain subject to taxation upon a later sale.
Are negative acquisition costs permissible when contributing to a corporation?
The BFH had previously allowed negative acquisition costs in cases of withdrawals during the tax retroactive period. However, the legislator now clarifies that, in line with the tax authorities' view, withdrawals and contributions during the retroactive period must be taken into account when determining the contributed business assets, and negative acquisition costs are to be avoided.
When is a book value approach for contributed business assets not possible?
A book value approach is not possible if, taking into account withdrawals and contributions during the retroactive period, negative acquisition costs would result. In this case, the book values of the contributed assets must be stepped up to the extent necessary to avoid negative acquisition costs.
From when does the new rule on withdrawals and contributions during the retroactive period apply?
The new rule applies for the first time to contributions where, in cases of universal succession, the conversion resolution was adopted after 31 December 2023. In all other cases, it applies if the contribution agreement was concluded after 31 December 2023.